Jazz Photo Corp. v. U.S.

Decision Date16 July 2007
Docket NumberSlip Op. 07-109.,Court No. 04-00494.
Citation502 F.Supp.2d 1277
PartiesJAZZ PHOTO CORPORATION, Plaintiff, v. UNITED STATES, Defendant.
CourtU.S. Court of International Trade

Neville Peterson LLP (John M. Peterson, Curtis W. Knauss, George W. Thompson, Maria E. Celis and Catherine Chess Chen), for plaintiff.

Peter D. Keisler, Assistant Attorney General, Jeanne E. Davidson, Director, Patricia M. McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice (Stefan Shaibani and David S. Silverbrand); Beth Brotman and Paul Pizzeck, Customs and Border Protection, United States Department of Homeland Security, of counsel, for defendant.

Before: Judge Timothy C. Stanceu.

OPINION AND ORDER

STANCEU, Judge.

Before the court in the application of Jazz Photo Corporation ("Jazz" or "plaintiff') for attorneys' fees and other expenses under the Equal Access to Justice Act ("EAJA"), 28 U.S.C. § 2412(d) (2000). The court conditionally grants the application in part because the positions that the United States ("defendant") took before the United States Court of Appeals for the Federal Circuit on two of the issues in the litigation — the issue of permissible repair and the issue of segregation of merchandise — were not substantially justified.

I. BACKGROUND

The subject EAJA application arose from litigation involving Jazz's importations into the United States of certain "lens-fitted film packages" ("LFFPs"), which are more commonly known as "disposable cameras," "single use cameras," or "one-time use cameras." The LFFPs that Jazz, imported were previously-used LFFPs that had been fitted ("refurbished" or "reloaded") in China with new rolls of film and, for some models, new' batteries for the flash mechanism. Background information relevant to Jazz's EAJA application is presented in the opinion of the United States Court of Appeals for the Federal Circuit ("Court of Appeals") in Jazz Photo Corp. v. Int'l Trade Comm'n, 264 F.3d 1094 (Fed.Cir.2001) ("Jazz I"), the opinion of the United States Court of International Trade in Jazz Photo Corp. v. United States, 28 CIT ___, 353 F.Supp.2d 1327 (2004) ("Jazz II"), and the opinion of the Court of Appeals in Jazz Photo Corp. v. United States, 439 F.3d 1344 (Fed.Cir. 2006) ("Jazz III"), which affirmed the court's judgment in Jazz II. A summary of the background information pertinent to the court's ruling on plaintiff's EAJA application is presented below.

In its application, Jazz seeks, under 28 U.S.C. § 2412(d) (2000), legal fees and expenses paid to the law firm Neville Peterson LLP in litigation before the Court of International Trade and the Court of Appeals in Jazz II and Jazz III, respectively. Jazz II arose from litigation that Jazz commenced in the Court of International Trade on October 4, 2004 to contest the denial by United States Customs and Border Protection ("Customs") of Jazz's administrative protest of the exclusion from entry of two of its shipments of LFFPs that were entered at the port of Los Angeles/Long Beach, California on August 26 and August 27, 2004. Jazz II, 28 CIT at ___, ___, 353 F.Supp.2d at 1329-30, n. 2. On September 24 and September 26, 2004, respectively, Customs excluded all merchandise in the August 26 and August 27 shipments. Id. at 1329. In so doing, Customs ruled that the imported LFFPs were excluded from entry by a General Exclusion Order and Order to Cease and Desist ("Exclusion Order") issued in 1999 by the U.S. International Trade Commission ("ITC" or "Commission")pursuant to Section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1337 (2000) ("Section 337"). Id. at 1329, 1331. In 1998, Fuji Photo Film Co., Ltd. ("Fuji"), the holder of various patents used in manufacturing LFFPs, had initiated the Section 337 proceedings, in which the ITC determined that LFFPs imported by Jazz infringed patents held by Fuji. Id.; see In the Matter of Certain Lens-Fitted Film Packages, USITC Pub. No. 3219, Inv. No. 337-TA-406 (Aug.1999). On or about September 26, 2004, Jazz filed an administrative protest under 19 U.S.C. § 1514 contesting the exclusion of the merchandise in the August 26 and August 27, 2004 shipments. Jazz II, 28 CIT at ___, 353 F.Supp.2d at 1329. On September 29, 2004, Customs denied the protest, concluding that Jazz had not established admissibility of the imported LFFPs. Id. at 1330, n. 2.

During the litigation contesting the denial of the protest, the Court of International Trade set an expedited trial schedule with the consent of both parties. Id. To establish admissibility of its imported merchandise, Jazz was required to prove that the LFFPs in the two shipments were outside the scope of the Exclusion Order. See id. at 1329. This required Jazz to show that the spent disposable camera "shells" refurbished in China resulted from disposable cameras that had undergone a patent-exhausting "first sale" in the United States and that the reloading operation effected a "permissible repair," rather than a "prohibited reconstruction," of the original camera. Id. at 1333. During a four-day bench trial on October 12-14 and October 18, 2004, plaintiff produced documentary, videographic, and testimonial evidence relevant to the issues of permissible repair and first sale. Id. at 1330, 1340-47. The government did not introduce its own evidence at trial to demonstrate that Jazz's importations were not entitled to admission. Id. at 1340-41. Instead, the United States challenged the sufficiency of the proof of admissibility offered by Jazz, arguing that Jazz had failed to meet its burden of rebutting a statutory presumption that the decision by Customs to exclude the merchandise was correct. See id. at 1333, 1340-41; 28 U.S.C. § 2639(a)(1) (2000). The government argued that Jazz's factual showings on the shell collection procedure and the reloading operation failed to satisfy the burden of proof for the admissibility of any individual camera. See Jazz II, 28 CIT at ___, 353 F.Supp.2d at 1333, 1340-41.

The imported LFFPs at issue in Jazz II had been refurbished by Polytech Enterprise Limited ("Polytech") at facilities in China. The majority of these LFFPs were produced from used shells that Polytech obtained from a collector of shells, Photo Recycling Enterprise, Inc. ("Photo Recycling"). The remaining LFFPs were processed using shells that Jazz acquired from another shell collector, Seven Buck's Inc. ("Seven Buck's"), and provided ti) Polytech for processing. Id. at 1341-42. The court held in Jazz II that plaintiff had produced evidence sufficient to establish a "first sale" for the LFFPs processed from shells purchased from Photo Recycling and that these LFFPs were entitled to admission to the extent that Jazz could demonstrate that these LFFPs could be segregated from the remaining cameras in the two shipments. Id. at 1347-54. The court concluded that plaintiff failed to establish a "first sale" in the United States for the LFFPs processed from the Seven Buck's shells, which accordingly did not qualify for admission. Id. at 1348-50. Distinguishing between the two types of shells, the court concluded that Jazz was unable to produce evidence showing that the Seven Buck's shells had been collected, directly or indirectly, from photo processors located in the United States. Id. The court further held that plaintiff produced evidence sufficient to establish that all of the LFFPs in the two shipments had undergone processing constituting a permissible repair. Id. at 1347-48. Because the two shipments contained some LFFPs resulting from Seven Buck's shells, the court issued an order directing Customs, with the participation of Jazz, to conduct an examination of the merchandise to determine if the LFFPs processed from Seven Buck's shells could be segregated from the remaining LFFPs in the shipments. Id. at 1352; Order for Expedited Administrative Determination (Nov. 5, 2004). The court reopened the trial record to allow the parties to obtain and to introduce evidence on the segregation issue and considered the responsive submissions of the parties. Jazz II, 28 CIT at ___, 353 F.Supp.2d at 1352. The court concluded that Jazz had established the ability to segregate the LFFPs made from Seven Buck's shells from the admissible LFFPs, except for certain cartons in which LFFPs from the master lot number Jazz had assigned to Seven Buck's shells ("Master Lot Number 463") were commingled with other master lot numbers, for which cartons the court, in entering judgment, denied admissibility in the entirety. Id. at 1352-54.

Following appeal by Jazz, the government, and Fuji, the Court of Appeals affirmed the court's judgment in Jazz III. See Jazz III, 439 F.3d at 1358. No party sought a rehearing or a writ of certiorari.

II. DISCUSSION

Jazz brings its application for attorneys' fees and expenses pursuant to USCIT Rule 54.1(a), under which the court may award attorneys' fees and expenses where authorized by law. Jazz argues that EAJA, 28 U.S.C. § 2412(d)(1)(A), authorizes the award of attorneys' fees and expenses in this case. Pl.'s Application for an Award of Att'y Fees Under the Equal Access to Justice Act 1 ("Pl.'s Application"). In pertinent part, EAJA provides as follows:

Except as otherwise specifically provided by statute, a court shall award to a prevailing party other than the United States fees and other expenses ... incurred by that party in any civil action ... 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.

28 U.S.C. § 2412(d)(1)(A). To award fees and expenses upon an EAJA claim, the court must determine that the claimant met the following criteria: plaintiff prevailed in the action, the government's position was not...

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