Sakar Intern., Inc. v. U.S., Slip Op. 06-181. Court No. 06-00025.

• Court: U.S. Court of International Trade
• Writing for the Court: Stanceu
• Citation: 466 F.Supp.2d 1333
• Parties: SAKAR INTERNATIONAL, INC., Plaintiff, v. UNITED STATES, Defendant.
• Docket Number: Slip Op. 06-181. Court No. 06-00025.
• Decision Date: 12 December 2006

466 F.Supp.2d 1333 SAKAR INTERNATIONAL, INC., Plaintiff,
v.
UNITED STATES, Defendant. Slip Op. 06-181. Court No. 06-00025. United States Court of International Trade. December 12, 2006.

Page 1334

COPYRIGHT MATERIAL OMITTED

Page 1335

Tuttle Law Offices (James C. Tuttle), New. York City, for Plaintiff.

Peter D. Keisler, Assistant Attorney General, David M. Cohen, Director, Commercial Litigation Branch, Civil Division, United States Department of Justice (Domenique Kirchner); Brian Morris, Senior Attorney, Office of the Associate Chief Counsel, Bureau of Customs and Border Protection, United States Department of Homeland Security, of counsel, for defendant.

Before: Timothy C. Stanceu, Judge.

OPINION

STANCEU, Judge.

Plaintiff Sakar International, Inc. ("Sakar") challenges as unlawful an administrative decision issued on December 29, 2005 by the Bureau of Customs and Border Protection, United States Department of Homeland Security ("Customs"), assessing Sakar a mitigated penalty of $67,775 for the importation by Sakar of merchandise that Customs alleged to be counterfeit. Following a motion by defendant United States to dismiss for lack of subject matter jurisdiction and the failure to state a claim on which relief can be granted, plaintiff moved to amend its complaint, which it previously had amended once as a matter of course, to set forth additional grounds in support of its assertion of subject matter jurisdiction. The court grants defendant's motion to dismiss the first amended complaint for failure to state a claim on which relief can be granted and denies as futile plaintiff's motion to amend that complaint.

I. BACKGROUND

In an administrative decision dated December 29, 2005, Customs assessed Sakar a mitigated civil penalty of $67,775 "under the provisions of 19 U.S.C. § 1526(f)" and provided Sakar 30 days in which to pay the mitigated penalty. First Am. Compl. Ex. 1 at 1. According to plaintiff's pleading, Sakar did not pay the mitigated penalty: and the United States has not instituted, in any court, a proceeding to recover on the penalty claim.

The facts surrounding the issuance of the December 29, 2005 decision are summarized herein based on plaintiffs pleading and the exhibits to plaintiff's submissions. On October 7, 2002, at the port of Newark, New Jersey, Sakar entered for consumption 500 travel chargers for personal digital assistants ("PDAs") and 2,311 mini-keyboards for PDAS, all of which were products of the. People's Republic of China. Id. ¶ 16 & Ex. 1 at 2. Customs seized this merchandise on December 18, 2002 for alleged violations of subsection (e) of Section 526 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1526(e) (2000) ("Section 526"). Id. ¶ 18. Section 526(e) directs the seizure of merchandise bearing a counterfeit mark that is imported into the United States in violation of provisions of the Lanham Act. See 15 U.S.C. § 1124 (2000). With limited exceptions, merchandise so seized must be forfeited and destroyed. See 19 U.S.C. § 1526(e). Customs concluded that the travel chargers violated Section 526(e) because they bore a counterfeit mark of Underwriters Laboratories and that the keyboards displayed, on a function key, a counterfeit "Flying Window" trademark of the Microsoft Corporation. First Am. Compl. Ex. 2 at 1.

Plaintiff petitioned Customs for relief from forfeiture. Customs denied Sakar any relief in the administrative forfeiture proceeding. Id. ¶ 19; see Def.'s Opp'n to Pl.'s Mot. for Stay of Execution of Penalty Enforcement or Collection and Def.'s Mot. to Dismiss Pl.'s Compl. 3 ("Def.'s First Mot. to Dismiss"). After that denial,

Page 1336

plaintiff did not exercise its right, as provided in the Customs regulations, to demand that Customs initiate a judicial forfeiture proceeding. See generally, 19 C.F.R. Part 162, Subpart E-Treatment of Seized Merchandise (2002). As a result, 2 Customs destroyed the imported merchandise on August 28, 2003. Def.'s First Mot. to Dismiss 3 & App. 8-9.

Customs then conducted an administrative civil penalty proceeding under Section 526(f), which subjects any person importing merchandise seized under Section 526(e) to a "civil fine." See id.; 19 U.S.C. § 1526(f). The fine for "the first such seizure" is "not more than the value that the merchandise would have had if it were genuine, according to the manufacturer's suggested retail price, determined under regulations promulgated by the Secretary [of the Treasury]." 19 U.S.C. § 1526(f)(2). The fine for the second seizure and thereafter" is "not more than twice the value that the merchandise would have had if it were genuine, as determined under regulations promulgated by the Secretary [of the Treasury]." Id. § 1526(f)(3). Customs based the calculation of the fine on a finding that Sakar incurred penalties for two prior violations of 19 U.S.C. § 1526. See First Am. Compl. Ex. 1 at 2-3 (determining, in an internal Customs memorandum dated December 14, 2005, a mitigated penalty amount of $67,775 in response to Sakar's October 20, 2005 petition for mitigation); Def.'s First Mot. to Dismiss 3-4. In the administrative penalty proceeding, Customs originally determined the penalty amount to be $381,500 and later mitigated the penalty to half that amount, or $190,750. See First Am. Compl. Ex. 1 at 1. In the penalty decision challenged herein, Customs lowered its determination of manufacturer's suggested retail price from $190,750 to $67,775, assessed a penalty at twice that amount, and then mitigated the penalty by 50 percent to arrive at a final administrative civil penalty amount of $67,775. Id. ¶ 6 & Ex. 1 at 1.

Plaintiff's first amended complaint alleges that the penalty notice and underlying penalty determination by Customs are contrary to law in several respects.¹ Plaintiff contends that, contrary to the plain language of 19 U.S.C. § 1526(f)(2) and (3), no regulations were promulgated under which Customs may determine a manufacturer's suggested retail price. Id. ¶¶ 29, 44. Plaintiff alleges that Customs did not properly determine a "manufacturer's suggested retail price" for "genuine" merchandise because no such merchandise, and no such price, exist. Id. ¶¶ 30, 43. With respect to the travel chargers, plaintiff maintains that the Underwriters Laboratories mark was prematurely applied by the vendor of the travel chargers but that Underwriters Laboratories belatedly acknowledged its approval of the chargers within a few weeks of the arrival of the goods in the United States. Id. ¶¶ 35, 36. The keyboards, according to plaintiff, were not counterfeit because the display of the Microsoft Flying Window symbol on a function key was a fair use of that symbol and a technical use reference for the convenience of the keyboard user. Id. ¶¶ 38, 39. Further, the method Customs used to determine that both classes of merchandise were counterfeit was, in plaintiff's view, contrary to "empirical marketplace

Page 1337

and method proof requirements, fair use notions, and related requisites for counterfeit goods legal determinations" as set forth in prior decisions of the Court of International Trade. Id. ¶ 42. Based on these allegations, plaintiffs first amended complaint seeks a judgment vacating the Customs penalty decision or, alternatively, a declaratory judgment holding that the Customs civil penalty determination is invalid as contrary to 19 U.S.C. § 1526(f)(3), is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law, and violates the Due Process Clause of the Fifth Amendment of the Constitution of the United States. Id. at 19.

Defendant moves to dismiss the first amended complaint under USCIT R. 12(b)(1) for lack of subject matter jurisdiction, or alternatively under USCIT R. 12(b)(5) for failure to state a claim on which relief can be granted. Def.'s Mot. to Dismiss Pl.'s Am. Compl. and Def.'s Reply to Pl.'s Opp'n to Def.'s Mot. to Dismiss Pl.'s Compl. 3 ("Def.'s Second Mot. to Dismiss"). Defendant argues that 28 U.S.C. § 1581 (2000) does not grant the Court of International Trade jurisdiction over this action, that the issue is not ripe for judicial decision because the United States has not brought an action in any court to recover the civil penalty, and that the issuance of a civil penalty notice, absent an action to recover the penalty, does not constitute an injury in fact conferring on the plaintiff standing to sue. Id. at 11-12, 29-30, 36-38.

II. DISCUSSION

This case presents two issues pertaining to subject matter jurisdiction. The first issue is whether plaintiff's first amended complaint, by itself or when considered with the proposed amendment, pleads facts sufficient to bring the case within 28 U.S.C. § 1581(a), under which the court has exclusive jurisdiction over cases contesting denials of administrative protests of `decisions by Customs. The second issue is whether plaintiffs case falls within 28 U.S.C. § 1581(i), which grants the Court of International Trade exclusive jurisdiction to hear cases against the United. States arising under various laws of the United States that § 1581(i) describes by subject matter.

Plaintiff has the burden of pleading facts from which the court could conclude that it has jurisdiction over the subject matter of this action. McNutt v. Gen. Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 80 L.Ed. 1135 (1936) (plaintiff "must allege in his pleading the facts essential to show jurisdiction"). For the reasons stated below, the court concludes that jurisdiction is lacking under 28 U.S.C. § 1581(a) but that the court may exercise jurisdiction over the subject matter of plaintiffs case pursuant to 28 U.S.C. § 1581(i).

A. Jurisdiction Is Lacking under 28 U.S.C. § 1581(a)

The first amended complaint, even when read as modified by the proposed amendment, reveals that plaintiff's case does not satisfy the jurisdictional prerequisites of 28 U.S.C. § 1581(a). Under 28 U.S.C. § 1581(a), the Court of...