91 F.Supp.3d 1324 (CIT. 2015), 10-00119, United States v. American Casualty Co.

Docket Nº:: 10-00119
Citation:91 F.Supp.3d 1324
Opinion Judge:Nicholas Tsoucalas, Senior Judge:
Party Name:UNITED STATES, Plaintiff, v. AMERICAN CASUALTY CO. OF READING PENNSYLVANIA, and RUPARI FOOD SERVICES, INC., Defendants,
Attorney:No.: 10-00119 Mikki Cottet, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, argued for Plaintiff. With her on the brief were Benjamin C. Mizer, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Patricia M. McCar...
Judge Panel:Before: Nicholas Tsoucalas, Senior Judge.
Case Date:August 24, 2015
Court:Court of International Trade
 
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Page 1324

91 F.Supp.3d 1324 (CIT. 2015)

UNITED STATES, Plaintiff,

v.

AMERICAN CASUALTY CO. OF READING PENNSYLVANIA, and RUPARI FOOD SERVICES, INC., Defendants,

No.: 10-00119

United States Court of International Trade

August 24, 2015

As Corrected August 26, 2015.

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[Copyrighted Material Omitted]

Page 1326

Plaintiff's request for leave to amend the Complaint is granted in part and denied in part. Defendant's Motion to Dismiss is denied.

Mikki Cottet, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, argued for Plaintiff. With her on the brief were Benjamin C. Mizer, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Patricia M. McCarthy, Assistant Director, of Washington, DC. Of counsel on the brief was Brian J. Redar, Office of Associate Chief Counsel, U.S. Customs and Border Protection, of Long Beach, CA.

Lawrence M. Friedman, Barnes Richardson & Colburn, of Chicago, IL, argued for Defendant. With him on the brief were Shama K. Patari, Barnes Richardson & Colburn, of Chicago, IL, and Peter A. Quinter, Gray Robinson, P.A., of Miami, FL.

Before: Nicholas Tsoucalas, Senior Judge.

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OPINION AND ORDER

Nicholas Tsoucalas, Senior Judge:

Plaintiff, United States Customs and Border Protection, (" Customs" ) brought this action to recover civil penalties against Defendant, Rupari Food Services Inc., (" Rupari" or " Defendant" )1 for violations of Section 592 of the Tariff Act of 1930, 19 U.S.C. § 1592(a)(2012)2, and Defendant American Casualty Co. of Reading Pennsylvania, (" American Casualty" ) to recover, under bonds, unpaid customs duties. Rupari moves for dismissal of this action, post-answer, on the grounds that the Complaint fails to state a claim upon which relief can be granted and Customs failed to plead fraud with particularity. Customs opposes dismissal and requests leave to amend its Complaint. For the following reasons, Customs' request for leave to amend the Complaint is granted in part and denied in part, and Defendant's Motion to Dismiss is denied.

JURISDICTION AND STANDARD OF REVIEW

The Court possesses jurisdiction to hear this action under section 201 of the Customs Courts Act of 1980, 28 U.S.C. § 1582 (2012).3

A motion to dismiss for a failure to state a claim may be raised by motion under USCIT R. 12(c) after the pleadings are closed but early enough not to delay trial. USCIT R. 12 (h)(2)(B). A Rule 12(c) motion is reviewed under the same standard as a motion to dismiss under Rule 12(b)(6). Koyo Corp. of U.S.A. v. United States, 37 CIT__, 899 F.Supp.2d 1367, 1370 (2013). When reviewing a motion to dismiss for failure to state a claim, the court must accept as true the complaint's undisputed factual allegations and should construe them in the light most favorable to the plaintiff. Bank of Guam v. United States, 578 F.3d 1318, 1326 (Fed. Cir. 2009) (quoting Cambridge v. United States, 558 F.3d 1331, 1335 (Fed. Cir. 2009). To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. Bell A. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929, 949 (2007). To be plausible, the complaint need not show a probability of plaintiff's success, but it must evidence more than a mere possibility of a right to relief. Id. at 556-59, 127 S.Ct. at 1965-66, 167 L.Ed.2d at 940-41.

BACKGROUND

Rupari is a Florida corporation that purchased crawfish from abroad and sold it to restaurants in the United States. Compl.

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¶ ¶ 3, 12, June 20, 2011, ECF No. 2; Pl.'s Opp'n to Mot. to Dismiss (" Pl.'s Br." ) Purchase Agreement Ex. 10, at 13, Mar. 7, 1997, ECF No. 94-6. Rupari's seafood sales team consisted of Mr. Larry Floyd (" Floyd" ), Vice President of Rupari's Seafood Sales Division, and Stilwell, a commissioned seafood salesman. Pl.'s Br. Tr. of Dep. of William Vincent Stilwell (" Stilwell Dep." ) Ex. 1, at 13-14, Apr. 3, 2013, ECF No. 94-1; Pl.'s Br. Tr. of Dep. of Rupari Food Services Inc. (" Rupari Dep." ) Ex. 2, at 15-16, 17, Apr. 4, 2013, ECF No. 94-2.

In 1997 and 1998, Rupari sold crawfish to members of the Popeye's Operator's Purchasing Cooperative Association (" POPCA" ). Mr. Richard Porter (" Porter" ), the POPCA director of purchasing and distribution, communicated with Rupari through Floyd regarding the sale of crawfish. Pl.'s Br. Decl. of Richard L. Porter (" Porter Decl." ) Ex. 10, at ¶ ¶ 6, 7, Mar. 16, 2014, ECF No. 94-6.

On March 7, 1997, Porter and Floyd signed a Purchase Agreement wherein Rupari would sell POPCA 148,000 lbs. of " Chinese [c]rawfish [t]ail [m]eat." Pl.'s Br. Purchase Agreement Ex. 10, at 13, Mar. 7, 1997. The agreement also stated that a formal POPCA supply agreement would be sent shortly thereafter. Id. Floyd and Porter consummated the formal POPCA supply agreement on June 8, 1997. Id. at 14.

In August 1997, the United States Department of Commerce (" Commerce" ) conducted an antidumping investigation concerning crawfish tail meat from China. Commerce published the final determination of its antidumping investigation of freshwater crawfish tail meat from China on August 1, 1997. Notice of Final Determination of Sales at Less than Fair Value: Freshwater Crawfish Tail Meat From the People's Republic of China, 62 Fed.Reg. 41,347 (Aug. 1, 1997) (subsequently amended to correct ministerial errors at 62 Fed.Reg. 48,218 (Dep't of Commerce Sept. 15, 1997) (" Final Determination" ).

Yupeng Fisheries Ltd., (" Yupeng" ) a Chinese producer and importer of crawfish tail meat, was among the firms investigated by Commerce. Id. Yupeng did not receive a separate rate, and its crawfish tail meat exports were subject to the China-wide rate of 201.63 percent. Id. at 41,358. Whole crawfish, however, were excluded from the scope of the antidumping duty investigation. Id. at 41,347. From 1996 to 1998, Yupeng sold Rupari whole cooked frozen crawfish and cooked frozen crawfish tail meat. Pl.'s Br. Stilwell Dep. Ex. 1, at 17-18.

Floyd and Stilwell mainly communicated with Mr. Tian Wei, a Yupeng salesman, but also communicated with Mr. Wang Yon Min, Yupeng's owner, (" Wang" ), regarding the sale of crawfish to Rupari. Id. at 17, 21.

On October 17, 1997, POPCA sent Floyd and Rupari a letter confirming that Popeye's would purchase 1,500 cases of crawfish. Pl.'s Br. Crawfish Confirmation Letter from James Brailey, Purchasing Manager, POPCA, to Floyd Ex. 10, at 30, Oct. 17, 1997.

In November 1997, Wang, Yupeng's owner, created Seamaster Trading Company Ltd. (" Seamaster" ) which was located in Thailand. Compl. at ¶ 13. Yupeng shipped crawfish tail meat from China to Seamaster in Thailand. Pl.'s Br. Packing List, Bill of Lading, Invoice, Manifest or Freight List Ex. 6, at 1-12, ECF No. 94-5. Rupari was aware that Wang created Seamaster and was the principal owner of both Yupeng and Seamaster. Pl.'s Br. Rupari Dep. Ex. 2, at 5.

Wang approached Mr. Somchai Sriviroj, (" Sriviroj" ) the owner and managing director of Sea Bonanza Foods Company,

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Ltd., (" Sea Bonanza" ) a fish processing company in Thailand, and asked if Sea Bonanza could repackage frozen crawfish tail meat. Pl.'s Br. Tr. of Dep. of Sea Bonanza Foods Company, Ltd. Ex. 4, at 8, July 8-9, 2013, ECF No. 94-3.

On November 8, 1997, Seamaster entered into a contract with Sea Bonanza wherein Seamaster would ship crawfish tail meat from China to Thailand, and Sea Bonanza would repackage the crawfish tail meat in exchange for a processing fee. Pl.'s Br. Contract between Sea Master and Sea Bonanza Ex. 5, at 2, Nov. 8, 1997, ECF No. 94-4.

In January and April 1998, Yupeng shipped from China to Seamaster, in Thailand, product invoiced as " frozen crawfish." Pl.'s Br. Invoice Ex. 6, at 1, 3, Jan. 8, 1998, ECF No. 94-5.

Sea Bonanza repacked the frozen crawfish tail meat for Seamaster and labelled the meat a " product of Thailand." Pl.'s Br. Tr. of Dep. of Sea Bonanza Foods Company, Ltd. Ex. 4, at 8, 22. According to the Agricultural Affairs Office at the American Embassy in Bangkok, crawfish is not harvested in Thailand; moreover, Sea Bonanza never processed live crawfish. Id. at 7, 12; see also Pl.'s Br. Packing List Ex. 6, at 1, Apr. 18, 1998; Pl.'s Br. Facsimile from the Agricultural Affairs Office at the American Embassy in Bangkok, Thailand to Roy Johnson, Louisiana Dept. of Agriculture Ex. 8, at 1, Aug. 5, 1998, ECF No. 94-5.

Rupari assisted Seamaster with obtaining a customs broker and Seamaster became a non-resident importer of crawfish to the United States. Pl.'s Br. Rupari Dep. Ex. 2, at 4; Pl.'s Br. Entry Summary Ex. 11A, at 1-42, Mar. 13, 1998, ECF No. 94-7. Rupari stopped purchasing crawfish tail meat directly from Yupeng and began purchasing crawfish tail meat from Seamaster. See Pl.'s Br. Stilwell Dep. Ex. 1, at 18, 20. Rupari had never purchased crawfish from a source in Thailand prior to purchasing crawfish tail meat from Seamaster. Id. at 20.

On February 24, 1998, Porter sent a letter to Caro Produce regarding POPCA's Crawfish Etouffe promotion beginning March 9, 1998, and ending April 11, 1998. Pl.'s Br. Letter from Porter to Caro Produce-Angel Homan, Ex. 10, at 36, Feb. 24, 1998. The letter recited that POPCA ordered 1,200 cases of crawfish in 24.1 lb. bags from Rupari. Id.

On March 13, 1998, Seamaster filed a consumption entry describing the imported merchandise as 1,900 cartons of frozen crawfish, classified under U.S. Harmonized Tariff Schedule (" HTSUS" ) 0306.19.0010, free of duty, and marked as a product of Thailand. Pl.'s Br. Entry Summary Ex. 11A, at 1.

American Casualty issued customs bonds to Seamaster for...

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