Eastalco Aluminum Co. v. US, Court No. 83-01-00092 to 83-01-00094

• Decision Date: 26 October 1990
• Docket Number: 84-04-00588,83-01-00096,83-06-00792,83-01-00098,Court No. 83-01-00092 to 83-01-00094,85-11-01644,83-05-00696 to 83-05-00699,85-11-01645 and 88-10-00814. Suspension Calendar No. 83-01-00095.
• Citation: 750 F. Supp. 1135
• Parties: EASTALCO ALUMINUM COMPANY, Plaintiff, v. The UNITED STATES, Defendant. F.W. MYERS & CO., INC., a/c Eastalco Aluminum Company, Plaintiff, v. The UNITED STATES, Defendant. INTALCO ALUMINUM CORPORATION, Plaintiff, v. The UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

750 F. Supp. 1135

EASTALCO ALUMINUM COMPANY, Plaintiff, v. The UNITED STATES, Defendant.

F.W. MYERS & CO., INC., a/c Eastalco Aluminum Company, Plaintiff, v. The UNITED STATES, Defendant.

INTALCO ALUMINUM CORPORATION, Plaintiff, v. The UNITED STATES, Defendant.

Court Nos. 83-01-00092 to 83-01-00094, 83-01-00096, 83-01-00098, 84-04-00588, 83-05-00696 to 83-05-00699, 83-06-00792, 85-11-01644, 85-11-01645 and 88-10-00814. Suspension Calendar No. 83-01-00095.

United States Court of International Trade.

October 26, 1990.

Neville, Peterson & Williams, John M. Peterson, Peter J. Allen, New York City, for plaintiff.

Stuart M. Gerson, Asst. Atty. Gen., Washington, D.C., Joseph I. Liebman, Atty. in Charge, Intern. Trade Field Office, New York City, Bruce N. Stratvert, Civ. Div., U.S. Dept. of Justice, New York City, for defendant.

MEMORANDUM AND ORDER

RESTANI, Judge:

These actions, in which issue has not yet been joined, are pending on the Court of International Trade's (CIT) suspension calendar. Defendant moves this court for an order: (a) removing these actions from the suspension calendar, (b) granting defendant leave to file a counterclaim against plaintiff in each action, (c) precluding plaintiff's unilateral dismissal of these actions prior to the filing of such counterclaim and (d) granting such other and further relief as the court deems just and proper under the circumstances.

Alternatively, defendant moves for an order: (a) removing these actions from the suspension calendar, (b) remanding these actions to the United States Customs Service (Customs) for reconsideration of the appropriate classification and rate amount of duties chargeable with respect to the imported merchandise which is the subject of these actions absent further order of the court. Plaintiff opposes these requests on the basis that they are an unwarranted intrusion on its right under Rule 41(a) to dismiss an action prior to the filing of an answer, and on the basis that any counterclaim was compulsory in the test case.

FACTS

On January 14, 1983, test case plaintiff Eastalco filed several summonses in this court pursuant to 28 U.S.C. § 1581(a) (1982), contesting the classification by Customs of certain carbon refractory bricks used in the manufacture of aluminum. Each summons notified defendant and the court of plaintiff's intention to challenge Customs' denial of particular protests, filed pursuant to 19 U.S.C. § 1514, regarding the classification of these bricks. Customs had classified the blocks under item 517.61 of the former Tariff Schedules of the United States (TSUS) (1981), and had assessed duties accordingly. Plaintiff protested that the bricks were properly entitled to dutyfree entry as "other" refractory bricks, under TSUS item 531.27.

On July 22, 1983, plaintiff Eastalco filed Complaints in two of the actions: XX-X-XXXXX (which encompassed entries of carbon refractory bottom bricks) and XX-X-XXXXX (which encompassed entries of refractory carbon sidewall and corner bricks). Defendant filed answers to these complaints on December 6, 1983, which denied plaintiff's demand for refunds, but contained no counterclaims or other demands for monetary relief in favor of the Government.

On January 11, 1984, plaintiff moved, with the consent of defendant, to consolidate Court Nos. 83-1-00095 and 83-1-00097 for purposes of trial; to have the consolidated case designated a test case pursuant to court rule 84; and to suspend ten (10) other summonses, pending disposition of the test case. The court granted this motion, and, on January 26, 1984, deemed the consolidated complaint filed. Defendant filed its answer to the consolidated complaint on March 26, 1984. Other cases were later suspended under the test case.

On January 14, 1985, defendant moved to amend its answer to the consolidated complaint in order to allege, by way of counterclaim, that the imported bricks involved in the consolidated test case were classifiable under TSUS item 517.91, a broad provision covering "other" articles of carbon or graphite. The provision carried a higher rate or duty than Customs' initial classification under TSUS item 517.61. Plaintiff did not oppose this motion to amend the pleadings. On February 12, 1985, the court granted defendant's motion to add the counterclaim in the test case. Plaintiff filed a reply to defendant's counterclaim on February 15, 1985.

The test case was tried on December 19, 1985, and submitted for decision. On September 23, 1986, the court issued an interlocutory Opinion and Order in the test case. Eastalco Aluminum Co. v. United States, 10 CIT 622, 1986 WL 10513 (1986). The court determined that plaintiff had overcome the presumption of correctness attaching to the Government's initial classification of the merchandise as "electrodes" under TSUS item 517.61. The court, however, had insufficient information to determine whether the goods were classifiable as "other" refractory bricks, as claimed by plaintiff, or whether the category claimed by defendant in its counterclaim applied. Accordingly, the case was remanded to Customs for further findings.

Following remand, the Court conducted an additional fact finding in the test case addressed to the issue of whether the imported bricks were "crystalline or substantially crystalline", as is required for classification as refractory brick under TSUS item 531.27.

On October 19, 1989, the court entered its final decision and judgment in the test case. Eastalco Aluminum Co. v. United States, 13 CIT ___, 726 F.Supp. 1342 (1989), aff'd, 916 F.2d 1568 (Fed.Cir.1990). The court held that the merchandise was not classifiable as refractory brick. Judgment in favor of the Government was entered on the counterclaim for classification under the general provision, TSUS item 517.91, as found by Customs on remand.

Defendant's motion herein was filed prior to resolution of the appeal in this matter.

DISCUSSION

I. The Suspension/Test Case Procedure.

This is a case of first impression regarding this court's unique "test case/suspension" procedure. Defendant fears that because of this court's decision on the counterclaim in the test case, plaintiff will voluntarily dismiss the suspended cases, thereby preventing the government from collecting the full amount of additional duties and interest due on the merchandise involved in the suspended cases.

While the court may look to decisions regarding the Federal Rules of Civil Procedure (Fed.R.Civ.P.) for guidance in interpreting its own rules, see CIT Rule 1, such decisions are of limited value in a case such as this due to its relation to a procedure not found in the Fed.R.Civ.P. Under the rules of this court, parties to actions involving similar issues of fact or law may move to "suspend" the action pending the outcome of a designated "test case" involving the aforementioned issues. See CIT Rule 84. While this procedure is similar to stay of proceedings under general federal procedure, it has its own history and some differences, notably a case may be suspended after the filing of a summons but before the filing of a complaint.

The special procedure was designed to deal with problems caused by the interplay of two factors. The first factor is the nature of importing, which often involves continuing entry of merchandise during the pendency of an action with regard to identical or similar merchandise. The second factor is the well established principle that the outcome of a classification case is not res judicata with respect to merchandise which is not the subject of the actual transactions before the court. United States v. Stone & Downer Co., 274 U.S. 225, 230-237, 47 S.Ct. 616, 616-19, 71 L.Ed. 1013 (1927). If not for the "test case/suspension" procedure or a similar stay procedure, litigation of tariff classification disputes would involve many suits covering similar issues of fact and law and unwieldy consolidations. See e.g. Old Republic Ins. Co. v. United States, 9 CIT 190, 191 n. 5, 1985 WL 25759 (1985), quoting H.H. Elder & Co. v. United States, 69 Cust.Ct. 344, 345 (1972). A strong stare decisis rule together with the suspension procedure has been an efficient way of resolving these disputes.

The suspension/test case procedure, which, as indicated, includes the right to file a summons without filing a complaint, was devised before the court obtained jurisdiction to render judgments on counterclaims. The court has very brief rules governing circumstances in which counterclaims may be filed and these rules do not address the suspended case issue. The rules also do not distinguish between compulsory and permissive counterclaims. Compare CIT Rule 13(a) and (b) with Fed. R.Civ.P. 13(a) and (b). Background relating to the court's counterclaim jurisdiction and thus to plaintiff's argument that any counterclaim was compulsory in the test case follows.

II. The Court's Counterclaim Jurisdiction.

Prior to 1980, in any action brought to contest the denial of a protest, the United States Customs Court could determine only whether an importer had met a dual burden of proof to (1) overcome the presumption of correctness attaching to the protested Government decision and (2) establish the correctness of its own asserted classification, rate of duty, or appraised value. In cases where a litigant proved the Government's decision erroneous but where the Government proved a classification, rate of duty, or appraisement which would have resulted in a higher duty than was assessed administratively, the court was without power to order the plaintiff to pay the higher duties. H.Rep. No. 96-1235, 96th Cong., 2d Sess. 35 (1980), U.S.Code Cong. & Admin.News 1980, pp. 3729, 3746; see also J.E. Bernard & Co. v. United States, 64 Cust.Ct. 525, 527, C.D. 4029 (1970) (citing cases), appeal dismissed, 58 CCPA 165 (1970).

In 1980, Congress amended the law to eliminate plaintiff's dual burden of proof, thereby requiring the court to find the correct...