Pietrofeso v. US, Court No. 91-12-00897.

• Decision Date: 25 August 1992
• Docket Number: Court No. 91-12-00897.
• Citation: 801 F. Supp. 743,16 CIT 751
• Parties: Diane PIETROFESO, Plaintiff, v. UNITED STATES of America, et al., United States Customs Service, Carol Hallett, Commissioner of Customs and Nicholas Brady, Secretary of the Treasury, Defendants.
• Court: U.S. Court of International Trade

801 F. Supp. 743

16 CIT 751

Diane PIETROFESO, Plaintiff, v. UNITED STATES of America, et al., United States Customs Service, Carol Hallett, Commissioner of Customs and Nicholas Brady, Secretary of the Treasury, Defendants.

Court No. 91-12-00897.

United States Court of International Trade.

August 25, 1992.

Bettina Schein, New York City, for plaintiff.

Stuart M. Gerson, Asst. Atty. Gen., Joseph I. Liebman, Attorney-in-Charge, Intern. Trade Field Office, Pamela G. Larrabee, U.S. Dept. of Justice, Civ. Div., Washington, D.C., for defendants.

OPINION

RESTANI, Judge:

On December 20, 1991, plaintiff filed a Summons and Complaint with the Clerk of this court, contesting the decision of the Secretary of the Treasury to affirm the denial of her application for a customs broker's license. Defendants have moved for judgment upon the administrative record, and dismissal of the action.

This court has jurisdiction to review the denial of an application for a customs broker's license pursuant to 28 U.S.C. § 1581(g)(1) (1988).¹ 19 U.S.C. § 1641(e)(3) (1988) provides that the factual findings of the Secretary of the Treasury are conclusive if supported by substantial evidence. 28 U.S.C. § 2640(a)(5) (1988) provides, however, that an appeal of a license denial shall be determined on the basis of the evidence presented to the court. As plaintiff did not seek leave to present additional evidence to the court, as permitted by 19 U.S.C. § 1641(e)(4),² the court shall decide this matter based only upon the record that was before the agency.

Background

On August 28, 1989, the Customs Service received plaintiff's application for a customs broker's license.³ The application revealed that the applicant was 28 years old and that she had worked in the customs field since 1982. She stated that the license would entitle her to raises and promotions at her place of employment. Plaintiff passed the written broker's examination required by 19 C.F.R. § 111.13. Her application was then sent to the office of the Special Agent in Charge, JFK Airport, in order for a background investigation to be conducted pursuant to 19 C.F.R. § 111.14.

The results of the background investigation are set forth in the Report of Investigation, dated May 22, 1990. A heavily redacted version of this report is contained in the administrative record. The report revealed that plaintiff had no arrest record. Interviews with plaintiff's employers and listed references bared no negative information regarding plaintiff. See Administrative Record Document ("A.Rec.Doc.") B at 7 (plaintiff was a "good employee"); id. at 8 (all references "responded favorably to the qualifications, integrity, and honesty of plaintiff"). The report ultimately noted that "no derogatory information on the applicant" had been uncovered. Id. at 2.

The background inquiry indicated, however, that plaintiff was "the niece of John Gotti (reputed leader of the Gambino Crime Family), and the daughter of Peter Gotti, (reputed captain of this criminal organization)." Id. at 2. A significant portion of the report was devoted to describing the criminal histories of various members of the Gotti family, including a number of criminal convictions of the applicant's father and her uncles, John and Eugene Gotti. The report noted that the Gambino family "influences ... commercial trade through trucking, warehousing, and union controls at JFK Airport and the Brooklyn Waterfront." Id. at 23. The only explicit reference in the report to plaintiff's associations with her family is a reference to plaintiff's 1989 wedding reception, which the report indicated was arranged by her father and attended by a number of alleged Gambino crime family members. Id. at 15.

Plaintiff's husband, Paul Pietrofeso, was also mentioned in the report. Mr. Pietrofeso purchased a partial ownership of a company, Cory Contemporary Contractors Inc. ("Cory"), in 1989. The report stated that a discrepancy was uncovered during the interview of Cal Classi, Mr. Pietrofeso's cousin and the president of Cory. Although Mr. Pietrofeso stated that he purchased his share of Cory for between $20,000 and $30,000 on August 1, 1989, Mr. Classi reported that Mr. Pietrofeso's investment consisted only of a "van and some tools." Id. at 11. A financial inquiry revealed that on August 8, 1989, Mr. Pietrofeso deposited $15,000 in cash into Cory's bank account.⁴ The report also contained the statement that "additional ⁵ intelligence revealed that Paul Pietrofeso is well thought of within the structure of the Gambino Crime Family." Id. at 13.

In a letter dated February 22, 1991, plaintiff was informed that her customs broker's application had been denied. The letter stated that "the required investigation ... indicated derogatory information, namely that you are related by blood and marriage to organized crime members." A.Rec.Doc. E at 1. Plaintiff appealed the denial to the Commissioner of Customs, and was permitted to make an oral presentation and submit a written memorandum in opposition to the denial. In her memorandum plaintiff denied that she was "related by blood and marriage to organized crime members," and alternatively that such relationship could not be the basis for the license denial. In a letter dated July 11, 1991, plaintiff was informed that Customs had upheld the denial.

Plaintiff appealed this decision to the Secretary of the Treasury ("Secretary"). By a letter dated October 21, 1991, the Assistant Secretary of the Department of Treasury (Enforcement), informed plaintiff's counsel that plaintiff's application was being denied under 19 C.F.R. §§ 111.16(b) and 111.16(b)(3).⁶ The letter stated that plaintiff's "relationships with reputed organized crime members" constituted sufficient grounds for the denial under the relevant regulations. A.Rec.Doc. M at 1.

Plaintiff commenced this civil action seeking review of the October 21 determination by the Secretary. The government maintains that plaintiff's relationships with reputed organized crime members constitute sufficient grounds for the denial of her application and, accordingly, the decision of the Secretary should be affirmed.

Discussion

Although the Customs Service denied plaintiff's application based solely upon 19 C.F.R. § 111.16(b)(3) ("a failure to establish the business integrity and good character of the applicant"), the Secretary's decision rested upon 19 C.F.R. § 111.16(b)(3) and the catch-all 19 C.F.R. § 111.16(b) ("The causes sufficient to justify denial ... shall include, but need not be limited to ...") (emphasis added). Therefore, it is necessary to view the Secretary's decision through this more general prism.

Plaintiff argues that the Secretary's decision violates substantive and procedural due process, and freedom of association, and was arbitrary, capricious, an abuse of discretion, and not in accordance with the law.

I. Due Process

Plaintiff claims that the denial of her application violated her right to procedural due process under the Fifth Amendment to the United States Constitution. Plaintiff contends that she has a legitimate claim of entitlement to the license according to the Customs Regulations, and this suffices as a property interest in a benefit. Plaintiff also maintains that she has a protected liberty interest in both engaging in a customs occupation and in her reputation. Defendants argue that plaintiff lacks either a protected property or liberty interest.

The requirements of procedural due process do not apply to a limitless range of interests; rather, a prior hearing is required only where a property or liberty interest is at stake. Board of Regents v. Roth, 408 U.S. 564, 569-70, 92 S.Ct. 2701, 2705, 33 L.Ed.2d 548 (1972).⁷ Of course, the property interests protected by procedural due process extend beyond a narrow construction of "real property," reaching "interests that a person has already acquired in specific benefits." Id. at 576, 92 S.Ct. at 2708. Thus, where a person has a legitimate claim of entitlement to a benefit, that person is entitled to procedural due process. See Scott v. Kewaskum, 786 F.2d 338, 339 (7th Cir.1986) quoting Roth, 408 U.S. at 577, 92 S.Ct. at 2709).⁸

In this case, the statute and controlling regulations clearly do not provide an applicant with an entitlement to a customs broker's license. The statute does not tell the Secretary when he or she must grant a license. See 19 U.S.C. § 1641(b)(2) (1988) ("The Secretary may grant an individual a customs broker's license ...") (emphasis added). Likewise, the regulations provide the Secretary with a certain amount of discretion. See supra n. 6. To construe the statute and regulations as granting an applicant a property interest in a customs broker's license would curb the Secretary's discretion in a manner inconsistent with such statute and regulations. In Scott v. Kewaskum, the Seventh Circuit held that a village board's denial of a liquor license did not deprive applicants of a property interest within the meaning of the Fourteenth Amendment. Scott, 786 F.2d 338. The Scott court observed that the Wisconsin statute governing the grant of liquor licenses conditions licenses on the citizenship, age and good moral character of the applicant. Id. at 340. The court noted, however, that "although the statute specifies people to whom licenses must be denied, it does not say when a license must be granted." Id. Ultimately, the court concluded, the lack of substantive criteria in the statute meant that there was no "property" interest.⁹ This rationale has clear application to the statute and regulations pertaining to customs brokers' licenses; nowhere do these provisions state in which situations a customs broker's license must be granted. Thus, plaintiff's argument that she has a property interest in obtaining a customs broker's license is not persuasive.

Plaintiff also bases her procedural due process argument on the deprivation of a constitutionally protected liberty...