U.S. v. Hanover Ins. Co.

• Decision Date: 01 May 1996
• Docket Number: Nos. 95-1192,95-1215,s. 95-1192
• Parties: The UNITED STATES, Plaintiff-Appellant, v. The HANOVER INSURANCE CO., Defendant/Cross-Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1052

82 F.3d 1052

18 ITRD 1161

The UNITED STATES, Plaintiff-Appellant, v. The HANOVER INSURANCE CO., Defendant/Cross-Appellant.

Nos. 95-1192, 95-1215.

United States Court of Appeals Federal Circuit.

May 1, 1996.

Appealed from U.S. Court of International Trade; DiCarlo, Chief Judge.

Rhonda K. Schnare, Attorney, Commercial Litigation Branch, Department of Justice, Washington, D.C., argued for plaintiff-appellant. With him on the brief was Frank W. Hunger, Assistant Attorney General and David M. Cohen, Director.

Ronald W. Gerdes, Sandler, Travis & Rosenberg, P.A., Miami, Florida, argued for defendant/cross-appellant. With him on the brief were Gilbert Lee Sandler and Arthur K. Purcell.

Wayne Jarvis, Michael G. Hodes and James L. Sawyer, Hodes & Pilon, Chicago, Illinois, were on the brief for Amicus Curiae, Intercargo Insurance Company.

Before RICH, MAYER, and BRYSON, Circuit Judges.

Opinion for the court filed by Circuit Judge MAYER. Dissenting opinion filed by Circuit Judge BRYSON.

MAYER, Circuit Judge.

The United States appeals from a judgment of the United States Court of International Trade holding that the United States Customs Service may not enforce a time-barred claim for antidumping duties by resort to administrative procedures. United States v. Hanover Ins. Co., 869 F.Supp. 950 (Ct. Int'l Trade 1994). We affirm.

Background

The facts are not in dispute. On November 10, 1992, the United States commenced an action against Hanover Insurance Company (Hanover), surety for Gambles Import Corporation, to recover unpaid antidumping duties and interest. Customs issued the original bills for these antidumping duties in 1978, some 14 years before this action was filed. Subsequent negotiations failed and the government's claim accrued in September 1986. United States v. Hanover Ins. Co., 17 Ct. Int'l Trade 693 (1993). On Hanover's motion, the court dismissed the action as barred by the six year statute of limitations, 28 U.S.C. § 2415(a) (1988). Id.

Despite the dismissal, Customs continued to demand payment and threatened Hanover with administrative sanctions. These sanctions included directing all district and regional directors not to accept any merchandise covered by bonds underwritten by Hanover, and requesting that the Treasury Department remove Hanover from the list of approved sureties pursuant to 19 U.S.C. § 1623 (1988). ¹ Customs claimed that despite the dismissal by the Court of International Trade, it had the right to refuse to do business with Hanover "unless Hanover demonstrated the existence of a significant legal justification for nonpayment" of the time-barred duties. Hanover responded to these threats citing as "legal justification" that the Court of International Trade had dismissed Customs' claims because they were barred by the statute of limitations. Customs dismissed Hanover's response as both untimely and legally insufficient.

Hanover then filed a motion for civil contempt in the prior action before the Court of International Trade arguing that the threatened administrative actions contravened the order dismissing the case pursuant to the statute of limitations. Customs responded that its actions did not violate that order because it only prevented enforcement of the debt by legal process; the order did not extinguish Customs' right to collect. The government also argued that the statute of limitations does not apply to administrative proceedings and thus did not bar administrative action against Hanover based exclusively on Customs' time-barred claim.

The Court of International Trade rejected the government's arguments. It concluded that it had "jurisdiction to determine the effect of, and to enforce its own judgments," and therefore could determine the legal effect of its prior dismissal. 869 F.Supp. at 952. ² The court reasoned that the structure of 28 U.S.C. § 2415, and its legislative history demonstrates that Congress intended for the limitation period to apply to administrative actions. Id. at 953-55. It held that Customs could not circumvent the statute of limitations, and the order of dismissal, by coercing Hanover to pay through administrative processes based exclusively on Customs' time-barred claim. Id. at 957-58. The court accordingly enjoined Customs from further administrative attempts to collect the claim. It also denied Hanover's motion for civil contempt because Customs' action was not a willful obstruction of justice.

Discussion

We first address the jurisdiction of the Court of International Trade to entertain Hanover's motion for civil contempt, and to enjoin Customs from pursuing administrative remedies against Hanover. The government argues that the order of dismissal did not direct Customs to take, or refrain from taking, any action. Thus there was no requisite coercive order which could give rise to contempt in this case. Without contempt jurisdiction, the government argues that the court could not enjoin Customs from using administrative procedures to force Hanover to pay the time-barred debt. We disagree with the government's analysis.

The trial court reviewed Customs' administrative processes against Hanover in light of its previous judgment that the claim was barred by the statute of limitations. Like district courts, see 28 U.S.C. § 1585 (1994), the Court of International Trade has the inherent power to determine the effect of its judgments and issue injunctions to protect against attempts to attack or evade those judgments. The issue before the court on Hanover's motion for civil contempt was whether Customs' attempt to circumvent the limitation period by resort to administrative actions was contrary to the prior order of dismissal. Such an inquiry falls squarely within the court's inherent power to determine the effect of its prior judgments. Where a party's conduct is in violation, or evasive, of a prior judgment, the Court of International Trade also has authority to enjoin that conduct regardless of whether the conduct amounts to civil contempt.

We turn to the effect of the statute of limitations, 28 U.S.C. § 2415, ³ on Customs' subsequent administrative attempts to collect the time-barred duties. The government claims that the statute of limitations does not apply to administrative actions taken by Customs pursuant to 19 U.S.C. § 1623, and the implementing regulation at 19 C.F.R. § 113.38, but serves only to preclude the government from collecting duties from Hanover by judicial process. As support, it cites language in section 2415(a) which expressly refers to the filing of a complaint in court and the requirement that the action be for money damages. The government then argues that "refus[ing] to do business with a surety as a result of nonpayment is not an action for money damages as contemplated by the statute of limitations." It admits that its administrative action would effectively eliminate Hanover's import surety business, but reasons that this result is "simply the consequence of the Government exercising its economic power in the marketplace for sureties, similar to the power of any private actor."

But the government is not simply a private actor in the marketplace of bonds on imported goods, it is a regulator of that marketplace and it has the power to keep Hanover from participating in it. The choice the government offers Hanover--pay the time-barred claim or be eliminated from the market--is illusory. We therefore reject Customs' appeal to treat it as any other market actor who has the right to do business with whom it pleases. As explained in the Court of International Trade's thorough opinion, for the government to prevail in its argument, the court must find that "in enacting section 2415, Congress intended to do no more than prohibit the commencement of court actions" and that "Congress intended agencies to be free to assert their claims at any time and by any means other than court actions, unencumbered by the period of limitation imposed by section 2415(a)." 869 F.Supp. at 952. Like the Court of International Trade, we do not believe this is what Congress intended.

Examination of the language and the structure of section 2415 leaves the conviction that, absent an express exception, Congress intended that agencies assert their claims within six years or lose the right to enforce them. Section 2415(a) provides, in part, that "every action for money damages brought by the United States or an officer or an agency thereof which is founded upon any contract express or implied in law or fact, shall be barred unless the complaint is filed within six years after the right of action accrues." Subsections (f) and (i) provide two exceptions to the general rule in subsection (a). Subsection (f) allows the United States to defensively assert time-barred claims by way of offset or counterclaim. Most relevant in refuting the government's present arguments, subsection (i) states that the statute will not prevent an agency from collecting any claim of the United States by way of administrative offset. Administrative offset is not a judicial action. Thus, Congress has considered and dealt not only with judicial actions in section 2415, but with extra-judicial agency actions as well. This is confirmed by the legislative history of subsection (i). See 869 F.Supp. at 953-54; S.Rep. No. 378, 97th Cong., 2d Sess. 16-17 (1982), reprinted in 1982 U.S.C.C.A.N. 3377, 3392-93.

Unlike the express exception for offsets, Congress did not include an exception to section 2415(a) for coercive agency actions predicated upon an otherwise time-barred claim, and we decline the government's invitation to judicially legislate one. Were coercive agency remedies available, "Customs could be in a better position in some disputes if it allows the six-year period to expire, and then threatens to impose sanctions. The right of the opposing party to assert any defenses available in a court of law would be no longer present." 869 F.Supp. at 957.

Congress...