Inner Secrets/Secretly Yours, Inc. v. US

• Decision Date: 07 February 1996
• Docket Number: Slip Op. 96-33. Court No. 95-01-00044.
• Citation: 916 F. Supp. 1258,20 CIT 210
• Parties: INNER SECRETS/SECRETLY YOURS, INC., Plaintiff, v. UNITED STATES of America, et al., Defendants.
• Court: U.S. Court of International Trade

916 F. Supp. 1258

20 CIT 210

INNER SECRETS/SECRETLY YOURS, INC., Plaintiff, v. UNITED STATES of America, et al., Defendants.

Slip Op. 96-33. Court No. 95-01-00044.

United States Court of International Trade.

February 7, 1996.

Ross & Hardies, Washington, DC (Steven P. Kersner), for plaintiff.

Frank W. Hunger, Assistant Attorney General, Washington, DC; Joseph I. Liebman, Attorney in Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, U.S. Department of Justice (Barbara Silver Williams); of counsel: Karen P. Binder, Office of Assistant Chief Counsel, New York City, International Trade Litigation, United States Customs Service, for defendants.

OPINION

TSOUCALAS, Judge:

Pursuant to Rule 68(a) of this Court, plaintiff has filed for reimbursement of attorney's fees and other expenses under the Equal Access to Justice Act ("EAJA"), 28 U.S.C. § 2412 (1988 & Supp. V 1993).

Background

Plaintiff made various entries of women's flannel boxer shorts imported from Hong Kong. The specific facts surrounding these importations are presumed known and will be addressed here only saliently.

In July 1994, plaintiff made two importations, classifying the subject merchandise under 6108.21.00, Harmonized Tariff Schedule of the United States ("HTSUS"), visa quota category 352, as women's knitted cotton briefs and panties at 8.1% ad valorem.¹ Believing plaintiff's merchandise to be outerwear, the United States Customs Service ("Customs") detained the merchandise. On August 2, 1994, Customs conditionally released plaintiff's merchandise pending evaluation by a National Import Specialist ("NIS"). Subsequently, NIS concurred with Customs that the subject boxers were classifiable as outerwear shorts under 6204.62.4055, HTSUS, and required a quota category 348 visa. On September 9, 1994, Customs issued redelivery notices with respect to these entries. Subsequent importations in September 1994 resulted in Customs' demand for redelivery or outright rejection.

Responding to plaintiff's request for an internal advice request to resolve this situation, Customs issued Headquarters Ruling Letter ("HRL") 957068 on October 11, 1994. HRL 957068 noted that another ruling, HRL 087940, set forth seven criteria for distinguishing men's boxer shorts from non-underwear garments. Satisfying more than one of the listed criteria rendered the article in question presumptively outerwear. A third HRL, HRL 951754, had improperly utilized the criteria set forth in HRL 087940 to determine the classification of women's flannel boxer-style shorts. Nevertheless, Customs applied the seven criteria to plaintiff's merchandise because plaintiff claimed that it had relied on the criteria in entering its merchandise. Adversely to plaintiff, Customs found that plaintiff's merchandise met two of the criteria, i.e., the garments had a single leg opening greater than the relaxed waist and lacked a fly, and were presumptively outerwear shorts. Customs then evaluated the subject boxers anew based on basic tenets of classification, tariff terms, judicial precedent, marketing and advertising information, etc. confirming its classification under 6204.62.4055, HTSUS, textile category 348 visa, dutiable at 17.7% ad valorem.

Believing Customs' classification erroneous, plaintiff sought a preliminary injunction from this Court. The Court responded with dismissal for lack of jurisdiction as plaintiff had failed to exhaust administrative remedies. Inner Secrets/Secretly Yours, Inc. v. United States, 18 CIT ___, 869 F.Supp. 959 (1994). Plaintiff then filed protests challenging Customs' actions regarding the entries at issue in this case. Defendants' Opposition to Plaintiff's Motion for Reimbursement of Attorney's Fees and Costs ("Defendants Brief") at 4. Customs denied its protests and plaintiff countered by applying for injunctive relief once again. The Court denied plaintiff's request for a preliminary injunction for failure to satisfy the requisite criteria. However, the Court scheduled an expedited trial. Inner Secrets/Secretly Yours, Inc. v. United States, 19 CIT ___, ___, 876 F.Supp. 283, 288 (1995).

A trial de novo was held in this case on March 1, 1995. Judgment was rendered in favor of plaintiff, the Court ruling that plaintiff had prevailed in overcoming the presumption of correctness which attaches to classifications by Customs and that plaintiff's merchandise at issue is entitled to enter the United States under subheading 6208.91.3010 of the HTSUS, visa quota category 352. Inner Secrets/Secretly Yours, Inc. v. United States, 19 CIT ___, ___, 885 F.Supp. 248, 257 (1995). The Government chose not to appeal and the Court's judgment became final.

As the prevailing party, plaintiff now seeks recovery under the EAJA of attorney's fees and expenses incurred in contesting Customs' classification of plaintiff's merchandise. On September 27, 1995, the Court heard oral argument on plaintiff's application.

Discussion

Plaintiff alleges that, as a result of the Government's unreasonable actions, it incurred significant legal fees and expenses, was required to pay storage costs in the amount of $2,467.65, and lost $25,455 in profits because it had to reduce its selling price on 8,485 dozen boxers by $3.00 per dozen. Memorandum of Law in Support of Plaintiff's Motion for Attorney's Fees and Costs at 5, 12-13. In total, plaintiff seeks recovery of fees and expenses incurred from November 1994 through April 1995 in the amount of $90,342.54. The sole question before the Court is whether plaintiff is entitled to reimbursement of attorney's fees and expenses on the basis that the Government's position in this action was not "substantially justified" under the facts of this case and the law.

The Government insists that plaintiff is not eligible for such fees as, at all times, its position was substantially justified and well supported during litigation and trial of this action. Defendants' Brief at 6-15. In addition, the Government submits that the attorney's fees and costs sought by plaintiff are not factually or legally supported.² Id. at 15. Specifically, the Government contends that plaintiff seeks an award for certain fees and expenses which do not qualify for reimbursement and that plaintiff's itemization of certain fees and expenses is insufficient and inaccurate. The Government also claims that plaintiff improperly seeks fees in excess of statutory limitations. Id. at 16-27. According to the Government, the "public fisc should not bear these `silk pajama' expenses when `boxer shorts' rates are plainly adequate." Id. at 22 n. 20.

The Court now turns to resolution of the question at bar. Obviously, Rule 68(a) of the Court rules provides that the "Court may award attorney's fees and expenses where authorized by law." In addition, awards of attorney's fees and expenses are governed by the EAJA, 28 U.S.C. § 2412 which states in relevant part:

(a)(1) Except as otherwise specifically provided by statute, a judgment for costs, as enumerated in section 1920 of this title, but not including the fees and expenses of attorneys, may be awarded to the prevailing party in any civil action brought by or against the United States or any agency or any official of the United States acting in his or her official capacity in any court having jurisdiction of such action....

(b) Unless expressly prohibited by statute, a court may award reasonable fees and expenses of attorneys, in addition to the costs which may be awarded pursuant to subsection (a), to the prevailing party in any civil action brought by or against the United States....

....

(d)(1)(A) Except as otherwise specifically provided by statute, a court shall award to a prevailing party other than the United States fees and other expenses, in addition to any costs awarded pursuant to subsection (a), incurred by that party in any civil action (other than cases sounding in tort), including proceedings for judicial review of agency action, brought by or against the United States in any court having jurisdiction of that action, unless the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust.

(Emphasis added.) "A statute authorizing the recovery of attorneys' fees and expenses from an agency of the United States constitutes a waiver of sovereign immunity, and must be strictly construed." United States v. Modes, Inc., 18 CIT ___, ___, Slip Op. 94-39 at 4, 1994 WL 88927 (Mar. 4, 1994).

In this matter, the "government bears the burden of establishing that its position was substantially justified or that special circumstances should preclude an award under the EAJA." Traveler Trading Co. v. United States, 13 CIT 380, 381, 713 F.Supp. 409, 411 (1989). See also Covington v. Department of Health & Human Services, 818 F.2d 838, 839 (Fed.Cir.1987). If the Government is unable to carry its burden, the court must award the requested fees and expenses. Traveler, 13 CIT at 381, 713 F.Supp. at 411. See also Brewer v. American Battle Monuments Comm'n, 814 F.2d 1564, 1569 (Fed. Cir.1987).

The Court then must determine whether defendant has met its statutory burden. The Supreme Court of the United States has found that the phrase "substantial justification" means:

"justified in substance or in the main" — that is, justified to a degree that could satisfy a reasonable person. That is no different from the "reasonable basis both in law and fact" formulation adopted by the Ninth Circuit and the vast majority of other Courts of Appeals that have addressed this issue.

Pierce v. Underwood, 487 U.S. 552, 565, 108 S.Ct. 2541, 2550, 101 L.Ed.2d 490 (1988). See also Urbano v. United States, 15 CIT 639, 641, 779 F.Supp. 1398, 1401 (1991), aff'd, 985 F.2d 585 (1992). Thus, the Government is required to show that it "was clearly reasonable in asserting its position, including its position at the agency level, in view of the law and the facts. The...