Dal-Tile Corp. v. U.S., Slip Op. 00-115.

• Decision Date: 01 September 2000
• Docket Number: Court No. 95-11-01550.,Slip Op. 00-115.
• Citation: 116 F.Supp.2d 1309
• Parties: DAL-TILE CORPORATION, Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

Page 1309

116 F.Supp.2d 1309

DAL-TILE CORPORATION, Plaintiff, v. UNITED STATES, Defendant.

Slip Op. 00-115.

Court No. 95-11-01550.

United States Court of International Trade.

September 1, 2000.

Ross & Hardies, Joseph S. Kaplan, New York, New York, for plaintiff.

David W. Ogden, Assistant Attorney General; Joseph I. Liebman, Attorney in Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, United States Department of Justice, James A. Curley; Edward N. Maurer, Office of the Assistant Chief Counsel, International Trade Litigation, United States Customs Service, Washington, DC, for defendant, of counsel.

OPINION

CARMAN, Chief Judge.

Plaintiff, Dal-Tile Corporation (Dal-Tile), moves for summary judgment pursuant to U.S. CIT R. 56(a), contending it is entitled to judgment as a matter of law because under 19 U.S.C. § 1505 (1994),¹ it is entitled to interest on eight million dollars of Customs duties deposited refunded to it by the United States Customs Service (Customs).

Defendant, United States, opposes plaintiff's motion and cross-moves for summary judgment pursuant to U.S. CIT R. 56(b), contending it is entitled to judgment as a matter of law because under 19 U.S.C. § 1505, plaintiff is entitled to interest on no more than the Customs duties deposited at entry on the nine representative entries reliquidated by Customs. This Court has jurisdiction pursuant to 28 U.S.C. § 1581(a) (1994).

BACKGROUND

Plaintiff, Dal-Tile, is an importer of wall and floor tile from Mexico. Between 1989 and 1993, plaintiff entered more than 10,000 entries of imported merchandise and deposited estimated regular customs duties on each entry. Plaintiff deposited approximately $25 million in Customs duties between 1989 and 1993.

Upon liquidation of merchandise entered in 1989 and 1991, plaintiff protested the classification of hundreds of entries of imported merchandise. In response, Customs entered into settlement discussions with plaintiff. A contract of settlement was reached on December 13, 1994, after Customs indicated to plaintiff's attorney, Steven P. Kersner, Esq., precisely what form plaintiff's offer of settlement should take. Plaintiff's attorney was provided a copy of an internal Customs memorandum entitled "Dal-Tile Corp.—Structuring Offer in Compromise" which specifically delineated the language and terminology to be used by plaintiff's attorney in any offer to compromise or settle. (See Plaintiff's Motion for Summary Judgment (PSJ), Ex. A attached to Kersner Aff.) Pursuant to Customs's memorandum, the final and agreed² upon contract of settlement provided:

The U.S. Customs Service shall grant Dal-Tile's protests concerning [the protested] entries to the extent that Dal-Tile shall receive refunds of Customs duties deposited in the amount of $8.0 million. The remaining protests filed by Dal-Tile concerning these entries shall be denied.

(PSJ, Ex. B (emphasis added).) The contract of settlement was silent as to the method by which Customs was to pay Dal-Tile the eight million dollar refund in "Customs duties deposited" and as to the issue of interest.

In order to pay plaintiff the amount due under the contract of settlement Customs utilized a method whereby Customs chose to reliquidate "nine representative entries"³ (Addendum to Declaration of Ramona Q. McCarthy (Add.Decl.McCarthy) at 7,⁴ attached to Defendant's Brief in Opposition to Plaintiff's Motion for Summary Judgment and in Support of its Cross-Motion for Summary Judgment (DSJ)), from the numerous entries for which protests were granted pursuant to the contract of settlement. So that the nine "representative" entries would yield the eight million dollar refund upon reliquidation, Customs "modified [Customs's electronic records] for the nine entries⁵ ... to enable the system to issue upon reliquidation of these entries seven duty refund checks for $999,999, one for $900,000, and one for $100,007, for a total of $8 million, although these were not the amounts of duties [actually] deposited" on the nine "representative" entries.⁶ (Declaration of Ramona Q. McCarthy (Decl.McCarthy) at ¶ 7, attached to Defendant's Brief in Opposition to Plaintiff's Motion for Summary Judgment and in Support of its Cross-Motion for Summary Judgment.) The nine "representative" entries were reliquidated on January 6, 1995.

On March 27, 1995, Dal-Tile timely filed a protest contesting Customs's failure to pay interest on the duties refunded in connection with the nine reliquidated "representative" entries. Dal-Tile alleged Customs was required to pay interest on Dal-Tile's refund pursuant to 19 U.S.C. § 1505, as amended by the Customs Modernization Act of 1993 (Mod Act) requiring the payment of interest on refunds of excess duties deposited determined on liquidation or reliquidation.⁷ Despite this change in the law, Customs denied the plaintiff's protests.

In December 1995, plaintiff timely filed this action. Plaintiff alleged, "[b]y refusing to pay interest on plaintiff's overpayment of duties deposited on the [nine (see Complaint at ¶ 2)] subject entries, which were [re]liquidated after the enactment of the [Mod Act], Customs violated 19 U.S.C. § 1505." (Complaint at ¶ 5.) In its answer defendant denied violating 19 U.S.C. § 1505. (Answer at ¶ 5.)

In July 1997, this Court stayed all proceedings in this case until a final decision was made by the Federal Circuit regarding the Mod Act's application to protests filed prior to, but acted upon by Customs after, the Mod Act's effective date.⁸ In Travenol Labs., Inc. v. United States, 118 F.3d 749 (Fed.Cir.1997), the Federal Circuit established a right to interest on all entries liquidated or reliquidated after the effective date of the Mod Act, regardless of whether the protests were filed prior to the Mod Act's effective date. See id. at 754. The Court vacated the stay in this matter in January of 1998.⁹ Plaintiff now moves and defendant cross-moves for summary judgment on the question of interest under 19 U.S.C. § 1505.

CONTENTIONS OF THE PARTIES

A. Plaintiff

Plaintiff, Dal-Tile, contends no genuine issues of material fact exist, and it is entitled to judgment as a matter of law. Dal-Tile argues there is no dispute between the parties regarding Customs's obligation under 19 U.S.C. § 1505(c) to pay interest on refunds resulting from entries reliquidated in January 1995. According to Dal-Tile, "the sole issue remaining in dispute is the principal sum upon which interest must be paid." (PSJ at 9.) Dal-Tile submits by the plain meaning of the statute "interest must be paid on the actual amount of excess duties refunded, $8 million." (Id.)

Plaintiff contends the statute requires interest on "any excess monies refunded, not any excess monies deposited." (PSJ at 13 (emphasis omitted).) Because the refund was effectuated through reliquidations occurring in 1995 and the amount of the refund was eight million dollars, plaintiff argues the principal sum upon which interest is owed is eight million dollars. Dal-Tile contends the legislative history supports its understanding of the statute.¹⁰

Plaintiff argues defendant's interpretation of the statute, that Dal-Tile's entitlement to interest is "limited to the interest on what the refund would have been if Customs, in reliquidating the nine entries which it selected to effectuate the $8 million refund, had refunded only the difference in [actual] duty on those nine entries," (PSJ at 9) is unsupported and contrary to the plain meaning of the law. Plaintiff asserts defendant's understanding of the statute would allow defendant to generate a "windfall for itself and to deprive plaintiff of substantial sums." (Id. at 12.) Plaintiff contends Customs unilaterally chose to effectuate the eight million dollar refund by reliquidating nine entries rather than the many entries originally protested by plaintiff. Customs acted, according to plaintiff, purely for its own administrative convenience. Plaintiff argues Customs should not be allowed to avoid, through a "self-serving ... process," (Plaintiff's Reply Memorandum in Support of Its Motion for Summary Judgment and in Opposition to Defendant's Cross-Motion for Summary Judgment at 7) what it otherwise would have been required to pay if it had proceeded on an entry by entry reliquidation to reach the eight million dollar figure.

Finally, plaintiff contends defendant's arguments based on sovereign immunity are irrelevant. According to plaintiff, the statute clearly requires defendant to pay interest. When a statute requires the United States to pay interest, plaintiff argues, sovereign immunity is no defense.

Accordingly, plaintiff argues its motion for summary judgment should be granted.

B. Defendant

Defendant cross-moves for summary judgment arguing there are no genuine issues of material fact in this matter. Defendant argues Customs is obligated to pay interest under section 1505, "only on $18,179.53, which is the amount of refunded estimated regular customs duty deposited by Dal-Tile on the nine entries that were reliquidated." (DSJ at 4-5.)

Based on the plain meaning of the statute, defendant argues, before Customs is required to pay interest on duties refunded upon reliquidation of an "applicable entry," estimated duties must have been deposited on that entry by the importer of record. Defendant asserts the accrual period outlined in section 1505(c) supports this reading of the statute because, under section 1505(c), the only "applicable entr[ies]" on which interest accrues are those on which estimated duties were deposited and which were liquidated or reliquidated. Payment of interest is not provided, according to defendant, on refunds where an entry is not liquidated or reliquidated or where no duties were deposited on an entry. Defendant contends only the nine entries enumerated in plaintiff's protest are "applicable entr[ies]" because they were the only entries reliquidated. The remaining entries...