Swisher Intern., Inc. v. U.S.

• Decision Date: 11 December 2001
• Docket Number: SLIP OP. 01-144.,Nos. 95-03-00322, 98-07-02438.,s. 95-03-00322, 98-07-02438.
• Citation: 178 F.Supp.2d 1354
• Parties: SWISHER INTERNATIONAL, INC., Plaintiff, v. UNITED STATES, Defendant. Sony Electronics, Inc., and, Arbon Steel & Service Co., Inc., Plaintiffs, v. United States, Defendant.
• Court: U.S. Court of International Trade

178 F.Supp.2d 1354

SWISHER INTERNATIONAL, INC., Plaintiff, v. UNITED STATES, Defendant.

Sony Electronics, Inc., and, Arbon Steel & Service Co., Inc., Plaintiffs, v. United States, Defendant.

SLIP OP. 01-144.

Nos. 95-03-00322, 98-07-02438.

United States Court of International Trade.

December 11, 2001.

COPYRIGHT MATERIAL OMITTED

McKenna & Cuneo, L.L.P., Washington, DC (Peter Buck Feller, Daniel G. Jarcho, and Joseph F. Dennin) for plaintiff Swisher.

Galvin & Mlawski, New York City (John J. Galvin) for plaintiffs Sony Electronics, Inc., and Arbon Steel & Service Co., Inc.

Robert D. McCallum, Jr., Assistant Attorney General, David M. Cohen, Director, Commercial Litigation Branch, Civil Division, United States Department of Justice (Jeanne E. Davidson, Todd M. Hughes, and Jeffrey A. Belkin), Richard McManus Office of the Chief Counsel, United States Customs Service, of counsel, for defendant.

Coudert Brothers, New York City (Steven H. Becker and Paul A. Horowitz) for amici HMT Plaintiffs' Steering Committee.

Baker & McKenzie, Washington, DC (Susan G. Braden, William D. Outman, Kevin M. O'Brien, Teresa A. Gleason, Michael E. Murphy) for amicus IBM.

OPINION

RESTANI, Judge.

This action is before the court on cross-motions for summary judgment pursuant to USCIT R. 56. The sole issue is whether plaintiffs are entitled to prejudgment interest on fees paid under the export provision of the Harbor Maintenance Tax ("HMT").

Jurisdiction

This court has jurisdiction pursuant to 28 U.S.C. § 1581(a) for claims based on protest of refund denials. See Swisher Int'l, Inc. v. United States, 205 F.3d 1358, 1364 (Fed.Cir.2000), cert. denied, 531 U.S. 1036, 121 S.Ct. 624, 148 L.Ed.2d 533 (2000). The court has jurisdiction under 28 U.S.C. 1581(i) for claims not arising from administrative proceedings. See United States Shoe Corp. v. United States, 114 F.3d 1564, 1570 (Fed.Cir.1997).

Standard of Review

Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law." USCIT R. 56(c).

Background

The HMT is an ad valorem tax on commercial cargo involved in "any port use." See 26 U.S.C. § 4461(a) (1996). In United States Shoe Corp. v. United States, 19 CIT 1284, 1289, 907 F.Supp. 408, 413 (1995), the court held that the HMT, as applied to exports, violated the Export Clause of the Constitution. See U.S. Const., Art. I, § 9, cl. 5. The court later awarded judgment for plaintiffs in the form of a refund of the principal amount paid "together with interest." See United States Shoe Corp. v. United States, 19 CIT 1413, 1413, 924 F.Supp. 1191, 1191 (1995).

The court subsequently noted that the question of interest was "not a matter without controversy and it cannot be resolved as a simple clerical matter." U.S. Shoe, 20 CIT 206, 207 (1996). Although the court called for additional briefing on the question of whether exporters may recover interest, the U.S. Customs Service ("Customs") filed a notice of appeal from the court's earlier decision on the constitutional issue. As a result, the court's final order awarding interest in U.S. Shoe was not addressed on appeal. The CIT's decision holding the HMT unconstitutional was affirmed by the Federal Circuit, 114 F.3d 1564 (Fed.Cir.1997), and by the U.S. Supreme Court, 523 U.S. 360, 118 S.Ct. 1290, 140 L.Ed.2d 453 (1998).

After the Supreme Court's decision in U.S. Shoe, the CIT developed a test case procedure to resolve the remaining issues surrounding the HMT, including the award of prejudgment interest. See IBM v. United States, No. 94-10-00625, slip op. 98-78, 1998 WL 325156 (CIT June 17, 1998), was selected as the test case to determine whether prejudgment interest should be awarded on HMT refunds. In IBM, the CIT entered judgment for plaintiff, ordered a refund of the principal paid, and adopted its prior position awarding interest. See id. On appeal, the Federal Circuit reversed the CIT's award of interest, holding that the statutory provisions in question did not provide the necessary authorization to award interest. See IBM v. United States, 201 F.3d 1367, 1369 (Fed. Cir.2000), cert. denied, 531 U.S. at 1183, 121 S.Ct. 1167, 148 L.Ed.2d 1025 (2001).

Various plaintiffs filed motions seeking additional proceedings on the issue of prejudgment interest. Because the Federal Circuit had only addressed statutory authorization for interest in IBM, plaintiffs Sony Electronics, Inc., and Arbon Steel & Service Co. Inc. ("Sony/Arbon") were granted leave to prosecute a complaint asserting various constitutional bases for the award of prejudgment interest.¹ Sony/Arbon argues that plaintiffs are entitled to interest under the Export Clause, the Takings Clause of the Fifth Amendment, the Fifth Amendment Due Process Clause, and under rights guaranteed by the Ninth and Tenth Amendments. Swisher International, Inc. ("Swisher") subsequently filed a motion for entry of judgment in which Swisher asserts similar constitutional claims as well as a statutory claim under 19 U.S.C. § 1505(b),² that Swisher argues was not addressed by the Federal Circuit in IBM.

Discussion

The federal government is immune from an award of interest absent an express waiver of sovereign immunity. See Library of Congress v. Shaw, 478 U.S. 310, 311, 106 S.Ct. 2957, 92 L.Ed.2d 250 (1986); see also IBM, 201 F.3d at 1370. "Apart from constitutional requirements, in the absence of specific provision by contract or statute, or `express consent ... by Congress,' interest does not run on a claim against the United States." Shaw, 478 U.S. at 317, 106 S.Ct. 2957 (quoting United States v. Louisiana, 446 U.S. 253, 264-265, 100 S.Ct. 1618, 64 L.Ed.2d 196 (1980), quoting Smyth v. United States, 302 U.S. 329, 353, 58 S.Ct. 248, 82 L.Ed. 294 (1937)). Swisher first argues that 19 U.S.C. § 1505(b) provides the express consent necessary to award Plaintiffs prejudgment interest here.

A. Section 1505(b)

The Harbor Maintenance Tax does not expressly authorize the payment of interest on HMT refunds. See IBM, 201 F.3d at 1371. Express consent may, however, be found "elsewhere." See id. (analyzing customs and internal revenue tax provisions to determine whether express consent exists). 26 U.S.C. § 4462(f) requires that all administrative and enforcement provisions of customs laws and regulations apply to the HMT as if it were a customs duty. See IBM, 201 F.3d at 1371 ("... even though the HMT is codified as an excise tax and is part of the Internal Revenue Code, Congress intended the administration and enforcement of the tax to be treated as if the tax was a customs duty."). Because the HMT is treated as a customs duty, Swisher argues that the express consent necessary to award interest can be found in 19 U.S.C. § 1505(b), the administrative provision regarding payment and refund of customs duties.

Section 1505(b) provides, in part, for the refund of excess duties, with interest, upon liquidation or reliquidation. 19 U.S.C. § 1505(b).³ Swisher argues that because § 1505(b) provides for an award of interest on refunds of excess monies deposited to pay duties, it should be construed to allow for an award of interest on refunds of the monies deposited to pay the HMT, which must be treated as duty under § 4462. The principal problem is that § 1505(b) is not designed to apply to the HMT.

The interest provision in § 1505(b) applies where a refund has been determined after a liquidation or reliquidation. "It is clear in order for Customs to be liable for interest, a refund must be `determined on a liquidation or reliquidation.' Indeed, under the statute it is a liquidation or reliquidation which triggers interest liability." Dal-Tile Corp. v. United States, 116 F.Supp.2d 1309, 1314 (CIT 2000); see also Travenol Labs., Inc. v. United States, 118 F.3d 749 (Fed.Cir.1997), 753 n. 5 (the "event that gives rise to interest liability is liquidation or reliquidation"); Novacor Chem. Inc. v. United States, 171 F.3d 1376, 1382 (Fed.Cir.1999) (reliquidation "is the triggering event in a dispute surrounding an award of interest").

Under 19 C.F.R. § 159.1, liquidation is defined as the final computation of the duties or drawback accruing on an entry. "Liquidation (or reliquidation), therefore, determines whether there has been an overpayment or underpayment, and thus defines the basis upon which interest might be due." Travenol, 118 F.3d at 753. There has been no liquidation or reliquidation to trigger § 1505(b) here. Swisher argues, however, that Customs' initial denial of its refund request was effectively a liquidation and a new determination is equivalent to a reliquidation, thus triggering the interest provisions of § 1505(b), and distinguishing its procedural posture from that of the IBM plaintiffs, who did not seek an administrative decision from Customs.

In IBM, the court rejected the argument that language regarding "liquidation" could be interpreted to include other actions by Customs. 201 F.3d 1367. The court looked to the actual purpose of § 1505(c),⁴ which describes specifically how interest is determined:

On its face, the statute contemplates an entirely different factual scenario from the one before us. However, amici suggest that by substituting the exporter for the "importer of record," the HMT quarterly report for the "entry," and Customs' acceptance of the HMT payment for "liquidation," we can apply § 1505(c) to provide interest on HMT refunds. We are without power to rewrite a Congressional enactment to make it fit a case for which it was clearly not intended, no matter how compelling the case, particularly in light of the Supreme Court's mandate that Congress must expressly consent to an award of interest. See Shaw, 478 U.S. at 314, 106 S.Ct. 2957. Accordingly, § 1505(c) does not authorize interest on HMT refunds.

IBM, 201...