Nippon Mini Bearing Corp. v. Weise, 97-55930

• Decision Date: 27 October 2000
• Docket Number: No. 97-55930,97-55930
• Parties: (9th Cir. 2000) NIPPON MINIATURE BEARING CORPORATION, Plaintiff-Appellant, v. GEORGE J. WEISE, Commissioner of the United States Customs Service; UNITED STATES CUSTOMS SERVICE, Defendants-Appellees
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1131

230 F.3d 1131 (9th Cir. 2000)

NIPPON MINIATURE BEARING CORPORATION, Plaintiff-Appellant, v. GEORGE J. WEISE, Commissioner of the United States Customs Service; UNITED STATES CUSTOMS SERVICE, Defendants-Appellees.

No. 97-55930

U.S. Court of Appeals for the Ninth Circuit

Argued and Submitted February 4, 1999

Filed October 27, 2000

[Copyrighted Material Omitted] Glenn W. Trost, Esq., Los Angeles, California, for the appellant.

Carol L. Wallack, Trial Attorney, United States Department of Justice (David M. Cohen, Director, Commercial Litigation Branch, United States Department of Justice, on the briefs), Washington, D.C., for the appellees.

Appeal from the United States District Court for the Central District of California. Ronald S. W. Lew, District Judge, Presiding. D.C. No.CV-96-08837-RSWL

Before: Melvin Brunetti, Frank J. Magill,¹ and M. Margaret McKeown, Circuit Judges.

OPINION by Jugde Brunetti; Partial Concurrence and Partial Dissent by Judge McKeown.

BRUNETTI, Circuit Judge:

This appeal raises the issue of whether the Court of International Trade ("CIT") has exclusive jurisdiction to entertain claims brought by an importer challenging the legality of forfeiture and penalty assessment actions taken by the United States Customs Service ("Customs"). Nippon Miniature Bearing Corporation ("NMB") brought action in the district court for declaratory and injunctive relief, claiming that Customs acted outside the scope of its authority when it seized NMB's goods and initiated administrative penalty proceedings under Section 592 of the Tariff Act, 19 U.S.C. 1592, and that such actions violated NMB's constitutional rights. The district court granted Customs' motion to dismiss for lack of subject matter jurisdiction finding that NMB's claims fell within the exclusive subject matter jurisdiction of the Court of International Trade ("CIT"). NMB now appeals. We have jurisdiction under 28 U.S.C. 1291, and we affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.

I.

NMB is an importer of miniature steel ball bearings. From 1986 to 1989, NMB imported into the United States ball bearings that were comprised of a steel alloy which its parent company, Minebea, had developed. These bearings were described in Customs entry documentation with parts numbers bearing the prefix "SS." Customs avers that the designation "SS" is used in the steel industry to indicate that a product is made of 440C stainless steel.

In the mid-1980s, Customs began an investigation into NMB's importation practices. It concluded that by using the prefix "SS" in its parts number, NMB was implicitly representing that the ball bearings were made of 440C stainless steel when in fact the ball bearings were of a different chemical component. Customs determined that this labeling of the ball bearings constituted a material misrepresentation and that it was therefore illegal to import such items into the United States.² Customs found that the importation of such items was actionable under 15 U.S.C. 1523 and 19 C.F.R. 11.13. As a result of this investigation, Customs in 1989 seized, pursuant to 18 U.S.C. 545 and 19 U.S.C. 1595a(c), nineteen shipments of ball bearings that were being entered into Los Angeles by NMB.

In order to obtain the return of its merchandise, NMB sought a quick release of the seized goods. Customs granted the release on the condition that NMB provide substitute letters of credit which NMB agreed would serve as a substitute res in any forfeiture proceeding. NMB also submitted a petition for remission of the forfeiture. After considering NMB's petition, Customs offered to remit the forfeiture upon NMB's payment of $1,015,930.00 which it found to equal the dutiable value of the seized ball bearings. NMB filed a supplemental petition for remission which Customs denied.

NMB then paid the penalty imposed. The parties disagree as to whether this payment was made "without protest." NMB first submitted the payment with a cover letter that stated that the payment was being made under protest. When Customs informed NMB's counsel that it would not accept any payment under protest, NMB submitted the payment under a cover letter from which the objectionable term had been deleted and Customs returned the letters of credit. NMB contends, however, that it never agreed to forego its right to seek judicial remedies in regard to the payment.

Pursuant to its investigation, Customs determined that, in addition to the shipments seized, NMB had imported approximately 926 additional shipments of ball bearings which NMB had identified as being composed of 440C stainless steal but were in fact made of a different alloy. In October 1989, Customs issued pre-penalty notices to NMB and Minebea advising that Customs was considering issuing penalties against them pursuant to 19 U.S.C. 1592, for falsely describing the goods imported in the 926 other entries. After considering written responses to the pre-penalty notices submitted by NMB and Minebea and conducting a further investigation, Customs determined that NMB and Minebea had violated 1592. Customs then issued notices of penalties to both parties.

In June 1994, NMB and Minebea filed a petition explaining why they should not be penalized for the alleged violation. After considering the petition, Customs decided not to mitigate the penalties and Customs so informed NMB and Minebea. NMB and Minebea filed a supplemental petition which Customs also rejected.

On December 17, 1996, NMB filed an action against Customs in the District Court for the Central District of California. NMB claimed that Customs had violated its due process and free speech rights protected by the United States Constitution by subjecting its goods to forfeiture and by initiating administrative penalty proceedings against it. NMB further asserted that Customs' actions were arbitrary, capricious, and outside of its statutory and regulatory authority. In this action, NMB sought: "(1) a declaration that the penalty proceedings instituted against NMB be found unlawful and set aside; (2) injunctions enjoining further penalty proceedings against NMB; and (3) injunctions ordering Customs to return NMB's seized property."

After NMB and Minebea failed to pay the civil penalties assessed against them by Customs, Customs referred the matter to the Department of Justice ("DOJ"). On December 23, 1996, the DOJ, on behalf of the United States, filed an action against NMB and Minebea in the CIT.

On April 14, 1997, Customs filed a motion to dismiss NMB's district court action based on a lack of subject matter jurisdiction, or in the alternative, for failure to state a claim upon which relief could be granted. On May 12, 1997, the district court held a hearing on Customs' motion. Finding that all of NMB's claims were within the exclusive jurisdiction of the CIT, the district court granted Customs' motion to dismiss for lack of subject matter jurisdiction. This appeal followed.

II.

This court reviews de novo a district court's determination that it lacks subject matter jurisdiction. Pentax Corp. v. Myhra, 72 F.3d 708, 710 (9th Cir. 1995).

NMB seeks in this action to challenge the legality of Customs forfeiture and administrative penalty proceedings. It bases its challenges on both constitutional and statutory grounds. The general federal-question provision, 28 U.S.C. 1331, would generally give the district court jurisdiction to hear such challenges provided that the government had waived its sovereign immunity with regard to these claims. K mart Corp. v. Cartier, 485 U.S. 176, 182 (1988). "The District Court would be divested of jurisdiction, however, if this action fell within one of several specific grants of exclusive jurisdiction to the Court of International Trade. " Id. at 182-83. The government claims that 28 U.S.C. 1582 and 1583 provide the CIT with exclusive jurisdiction over its penalty assessment proceedings and that NMB had waived the right to judicial review of Customs' seizure action. The district court found that the claims fell within the exclusive jurisdiction of the CIT and that it therefore lacked subject matter jurisdiction. In its decision, however, the district court did not distinguish between the two separate customs actions that were the subject of NMB's cause of action. Because the statutory authority and judicial review process for the forfeiture and penalty assessment actions are separate and distinct, the determination of where jurisdiction lies to review the actions must be analyzed separately. The district court erred in failing to distinguish between the two causes of action.

A.

Section 1582 provides the CIT with exclusive jurisdiction over civil enforcement claims brought by the United States. Specifically, 1582 states:

The Court of International Trade shall have exclusive jurisdiction of any civil action which arises out of an import transaction and which is commenced by the United States:

(1) to recover a civil penalty under section 592, 593A, 641(b)(6), 641(d)(2)(A), 704(i)(2), or 734(i)(2) of the Tariff Act of 1930;

(2) to recover upon a bond relating to the importation of merchandise required by laws of the United States or by the Secretary of the Treasury; or

(3) to recover customs duties.

28 U.S.C. 1582. Section 1583 further provides that "[i]n any civil action in the Court of International Trade, the court shall have exclusive jurisdiction to render judgment upon any counterclaim, cross-claim or third party action of any party if . . . such claim or action involves the imported merchandise that is the subject matter of the civil action . . .." 28 U.S.C. 1583. The government posits that, pursuant to this statutory scheme, the CIT has exclusive jurisdiction to hear all claims arising from Customs' enforcement of Section 1592.

NMB avers that this interpretation of the ambit of CIT's jurisdiction is contravened by the Federal Circuit's decision in ...