Hartford Fire Ins. Co. v. US

• Decision Date: 16 December 2009
• Docket Number: Slip Op. 09-142. Court No. 07-00067.
• Citation: 679 F. Supp.2d 1362
• Parties: HARTFORD FIRE INSURANCE COMPANY, Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

679 F.Supp.2d 1362

HARTFORD FIRE INSURANCE COMPANY, Plaintiff, v. UNITED STATES, Defendant.

Slip Op. 09-142. Court No. 07-00067.

United States Court of International Trade.

December 16, 2009.

Barnes, Richardson & Colburn (Frederic D. Van Arnam, Jr., Daniel F. Shapiro, and Eric W. Lander) for the Plaintiff.

Tony West, Assistant Attorney General; Jeanne E. Davidson, Director, Franklin E. White, Jr., Assistant Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, (Michael J. Dierberg); and Beth C. Brotman, Office of Assistant Chief Counsel, U.S. Customs and Border Protection, Of Counsel, for the Defendant.

OPINION

POGUE, Judge.

In response to a demand by the United States Bureau of Customs and Border Protection ("Customs") for the payment of antidumping duties secured by Plaintiff Hartford Fire Insurance Company's ("Plaintiff" or "Hartford") bonds, Plaintiff brings this action, asking the court to declare its bonds unenforceable. Pursuant to USCIT R. 12(b)(1), Defendant moves to dismiss, claiming a lack of subject matter jurisdiction because of Plaintiff's failure to utilize or exhaust its administrative protest remedies. For the reasons stated herein, the court grants Defendant's motion.

BACKGROUND

Customs' demand sought payment under eight single entry bonds issued by Hartford to secure entries of frozen cooked crawfish tail meat from the People's Republic of China (the "Hubei entries"). The Hubei entries were imported into the United States between July 30, 2003 and August 31, 2003 by Sunline Business Solution Corporation ("Sunline"). (See Am. Compl. ¶¶ 2, 8-9, 13; Pl.'s Resp. in Opp'n to Def.'s Mot. to Dismiss ("Pl.'s Resp.") 1-2.)

The Hubei entries were liquidated in July 2004 and March 2005 at an antidumping duty rate of 223%, following an antidumping administrative review. (Am. Compl. ¶¶ 10-12.) Sunline has made no payment of these antidumping duties, and on June 22, 2005, Customs made a demand on Hartford for, inter alia, the value of the eight bonds Plaintiff issued to secure payment of duties on the Hubei entries. (Id. ¶ 13; Pl.'s Resp. 2.)

Prior to Customs' demand, Hartford was informed, on May 6, 2005, by an outside source, that certain Sunline personnel had been arrested for filing false invoices with Customs. (Aff. of Daniel F. Shapiro, Esq. in Supp. of Pl.'s Resp. in Opp'n to Def.'s Mot. to Dismiss ("Shapiro Aff.") ¶ 4; Pl.'s Resp. 2.) See United States v. Shen, No. 03-CR-1208 (C.D.Cal. Nov. 25, 2003) (cited in Shapiro Aff. ¶ 7). Nonetheless, Hartford did not file a timely protest, pursuant to Section 514 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1514 (2006),¹ regarding the June 22, 2005 demand for payment.

Accordingly, on September 20, 2005, the time period for protesting Customs' June 22, 2005 demand against Hartford with respect to the Hubei entries expired. (Pl.'s Resp. 8; Def.'s Reply Br. in Supp. of its Mot. to Dismiss ("Def.'s Reply") 3.) See also 19 U.S.C. § 1514(c)(3) (2000) (amended 2004) ("A protest by a surety which has an unsatisfied legal claim under its bond may be filed within 90 days from the date of mailing of notice of demand for payment against its bond.").²

Plaintiff alleges that, rather than initiating a protest, on October 7, 2005, Plaintiff requested a copy of the court case file for Shen, No. 03-CR-1208, from the United States District Court for the Central District of California. (Shapiro Aff. ¶ 7.) On October 14, 2005, Plaintiff received a copy of this case file. (Id. ¶ 9.) The file was complete, with the exception of pages 1-38 of the "April 2004 Reporter's Transcript of Proceedings," which were received by Plaintiff on November 22, 2005. (Id.) As a result of reviewing the Shen case file, sometime between October 14, 2005 and November 2, 2005 Plaintiff ascertained that 1) on June 19, 2003, Customs had been informed by letter from Shanghai Taoen International Trading Co. ("STI letter") of the illegal importation of crawfish tail meat into the United States from China; and 2) that Customs had released to Sunline approximately $270,256 in cash deposits posted to secure other entries of crawfish tail meat from China. (See Shapiro Aff. ¶¶ 10-13.)

Plaintiff filed suit in this Court on February 26, 2007. In its amended complaint, Plaintiff alleges 1) that Customs' failure to disclose to Hartford the fact of Sunline's investigation for illegal importation of crawfish tail meat prior to Hartford's issuance of bonds securing the Hubei entries "materially increased Hartford's risk ... beyond that level of risk which Hartford intended to assume on those bonds" (Am. Compl. ¶¶ 34-35), thereby constituting a material misrepresentation fatal to the formation of an enforceable bond agreement (id. ¶¶ 41-42); 2) that, "based on its investigations, Customs knew or should have known that Sunline had induced Hartford to issue the bonds covering the Hubei entries through fraud or material misrepresentations" (id. ¶ 47), and that, as a result, "Customs did not, and could not, in good faith materially rely on the bonds issued by Hartford for the Hubei entries" (id. ¶ 48); 3) that, prior to releasing to Sunline cash deposits securing other entries of tail meat from China, Customs knew or should have known that the Hubei entries were as yet unliquidated and subject to an increase in dumping duties owed, and that, by releasing this "collateral," Customs increased Hartford's risk, thereby reducing Hartford's obligation to pay by the amount thus released (id. ¶¶ 53-62); and 4) that Hartford's obligation to pay should in any case be reduced by the amount of the released cash deposits because Customs "did not act with good faith and fair dealing when it refunded proceeds without notifying Hartford," denying Hartford the opportunity to seek relief under the equitable doctrine of set-off (id. ¶¶ 64-69).

For these reasons, Plaintiff contends that its bonds securing the Hubei entries are unenforceable as a matter of contract and suretyship law or, in the alternative, that its obligation to pay should be offset by the amount that was refunded by Customs to Sunline in connection with other entries. (See Am. Compl. ¶¶ 34-69.)

In its complaint, Plaintiff seeks to invoke the court's jurisdiction pursuant to 28 U.S.C. § 1581(i) (Am.Compl. ¶ 28), which grants the court exclusive residual jurisdiction over certain civil actions against the United States not covered by subsections 1581(a)-(h).

Defendant seeks dismissal, arguing that Hartford's claims could have been asserted in a timely protest and that jurisdiction for Hartford's challenge to Customs' charge must therefore be established pursuant to 28 U.S.C. § 1581(a).³ (See Def.'s Mem. 1-2.)

STANDARD OF REVIEW

Plaintiff, as the party seeking to invoke the court's jurisdiction, has the burden of establishing that jurisdiction. Cedars-Sinai Med. Ctr. v. Watkins, 11 F.3d 1573, 1583 (Fed.Cir.1993). Where, as here, the Defendant brings a facial challenge to dismiss for lack of subject matter jurisdiction, the factual allegations in Plaintiff's pleadings "are taken as true and construed in a light most favorable to the complainant." Id. (citation omitted). On the other hand, Plaintiff's "mere recitation of a basis for jurisdiction" is not controlling; rather, the court must determine the "true nature of the action," Norsk Hydro Canada, Inc. v. United States, 472 F.3d 1347, 1355 (Fed.Cir.2006) (internal quotation marks and citation omitted), and, where Plaintiff's factual allegations fail to establish a basis for subject matter jurisdiction over the true nature of Plaintiff's action, because Plaintiff has another adequate and reviewable remedy which applies, the case will be dismissed. See Hartford Fire Ins. Co. v. United States, ___ CIT ___, 507 F.Supp.2d 1331 (2007) (relying on Parkdale Int'l, Ltd. v. United States, 31 CIT 720, 491 F.Supp.2d 1262 (2007) and Abitibi-Consol., Inc. v. United States, 30 CIT 714, 437 F.Supp.2d 1352 (2006)), aff'd, 544 F.3d 1289 (Fed.Cir.2008) ("Hartford I").

DISCUSSION

By bringing this action, Hartford seeks to avoid payment of Customs' demand upon its bonds. See Hartford I, 544 F.3d at 1293. Thus, as in Hartford I, the "true nature" of Hartford's claim is that it is a challenge to that charge. As in Hartford I, "the unenforceability of the bonds Plaintiff alleges in its complaint is merely a theory of defense upon which Customs may grant the relief of cancelling the charge. In other words, despite alleging otherwise, Hartford is challenging a charge." Id. "The proper mechanism to challenge a charge is by a protest before Customs pursuant to 19 U.S.C. § 1514(a)(3)," id., denial of which protest may be reviewed in this Court pursuant to 28 U.S.C. § 1581(a). It follows that the exercise of jurisdiction over Plaintiff's case under subsection 1581(i) is precluded by Plaintiffs failure to utilize the administrative protest remedy available to it. See id.

Plaintiff makes two alternative arguments in support of its claim that jurisdiction is nevertheless proper here pursuant to 28 U.S.C. § 1581(i). First, Plaintiff alleges that it learned of the bases for its present causes of action after the period for protesting Customs' demand for payment on Plaintiff's bonds for the Hubei entries had already expired. Plaintiff argues that because Hartford therefore could not have availed itself of the protest remedy, jurisdiction under 1581(i) is appropriate in this case. (See Pl.'s Resp. 5-13 (citing St. Paul Fire & Marine Ins. Co. v. United States, 959 F.2d 960 (Fed.Cir. 1992)).)

Plaintiff's alternate ground for 1581(i) jurisdiction asserts that Hartford's claim is independent of the liquidation of the Hubei entries. Plaintiff contends that because, regardless of the status of liquidation, these bonds would have been subject to nullification by Hartford upon discovery of the contractual formation flaws it now alleges, Hartford's claim should be conceived not as the protest of a charge that...