U.S. v. Ricci

• Decision Date: 28 October 1997
• Docket Number: Court No. 95-09-01168.,Slip Op. 97-145.
• Citation: 985 F.Supp. 125
• Parties: UNITED STATES of America, Plaintiff, v. Eugene F. RICCI, doing business as Pier International Customs Brokerage, Defendant.
• Court: U.S. Court of International Trade

985 F.Supp. 125

UNITED STATES of America, Plaintiff, v. Eugene F. RICCI, doing business as Pier International Customs Brokerage, Defendant.

Slip Op. 97-145.

Court No. 95-09-01168.

United States Court of International Trade.

October 28, 1997.

Frank W. Hunger, Assistant Attorney General of the U.S., David M. Cohen, Director A. David Lafer, Senior Trial Counsel, Harold D. Lester, Jr., Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, Washington, DC, for Plaintiff; Colleen C. Piccone and Marjorie F. Cole, U.S. Customs Service, of Counsel.

Neville, Peterson & Williams, New York City, John M. Peterson and James A. Marino, of Counsel, for Defendant.

OPINION

WALLACH, Judge.

The United States seeks to recover an unpaid penalty of $30,000 from Eugene F. Ricci¹ based on a Customs Service audit of Ricci's records that found 169 entries for which he had failed to file an entry summary and/or pay duties timely, and a pattern of paying between 20 and 45 days late.

On April 3, 1992, Customs transmitted a prepenalty notice to Ricci, to which he responded. Customs notified Ricci that his response had not established an adequate reason to cancel the penalty in a letter dated February 9, 1993. On October 11, 1994, Customs rejected Ricci's request for mitigation of the penalty, and in consideration of his asserted financial distress, offered an option of paying the penalty or voluntarily surrendering his license. Ricci declined to do either, and this action ensued.

Before the Court are Ricci's Motion to Dismiss paragraphs 5, 6², 7, 8, 9, 12 and a portion of 11 of the Complaint and the government's Motion for Summary Judgment. This action can be decided in full by the government's Motion for Summary Judgment, which relies on paragraph 6 of the Complaint. Therefore, the Court need not reach the merits of the Defendant's Motion to Dismiss.

I. STANDARD OF REVIEW

This Court reviews a case brought under 19 U.S.C. § 1641(d)(2)(A) de novo. Section 1641 does not set out a standard of review for actions litigated under subsection 1641(d)(2)(A).³ Rather, it is necessary to examine 28 U.S.C. § 2640 and the Administrative Procedure Act, 5 U.S.C. § 706, to determine the standard applicable here.

Section 2640 provides that the Court of International Trade makes its determinations in an action under section 1641(d)(2)(A) "upon the basis of the record made before the court...." 28 U.S.C. § 2640(a)(5). The scope of review thus set out is not accompanied by a standard of review. Therefore, the court refers to the Administrative Procedure Act, which gives general guidance regarding the scope and standard of review to be applied in various circumstances. See Urbano v. United States, 967 F.Supp. 1322, 1328 (CIT 1997); Humane Society of the United States v. Brown, 920 F.Supp. 178, 195 (CIT 1996). The statute states in pertinent part:

The reviewing court shall ... (2) hold unlawful and set aside agency action, findings, and conclusions found to be ... (E) unsupported by substantial evidence in a case subject to subsections 556 and 557 of this title or otherwise reviewed on the record of an agency hearing provided by statute; or (F) unwarranted by the facts to the extent that the facts are subject to trial de novo by the reviewing court.

5 U.S.C. § 706(2)(E), (F). Because the instant action is reviewed on the record before the Court and not on the agency record, subsection 706(F) provides the standard of review.

Accordingly, this Court will review the evidence properly introduced before it de novo in rendering its decision. 5 U.S.C. § 706(2)(F). This de novo standard is not limited by the authorities, and thus applies to both the question of whether a penalty is warranted and the amount of the penalty. See, United States v. Priority Products, Inc., 9 C.I.T. 383, 386, 615 F.Supp. 591, 593 (1985), aff'd, 4 Fed. Cir. (T) 88, 793 F.2d 296 (1986). The Court is directed to determine the amount of penalty, if any, independently of Customs' decision. Id.

Summary judgment is appropriate where the record shows "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." CIT Rule 56(d). "Only disputes over facts that are material, that is, facts that might affect the outcome of the suit under governing law, will properly preclude the entry of summary judgment." Bauerhin Technologies Ltd. v. United States, 914 F.Supp. 554, 558 (C.I.T.1995), aff'd 110 F.3d 774 (Fed.Cir.1997). To create a genuine issue of fact, "evidence must be forthcoming from the nonmovant which would be sufficient to require submission to the jury of the dispute over the fact." Avia Group Int'l, Inc. v. L.A. Gear Calif., Inc., 853 F.2d 1557, 1560 (Fed.Cir.1988).

II. DISCUSSION

A. Applicable Statutes and Regulations

19 U.S.C. § 1641(b)(4) provides that "A customs broker shall exercise responsible supervision and control over the customs business that it conducts." Subsection 1641(d)(1) provides that the Secretary of the Treasury may "impose a monetary penalty ... if it is shown that the broker ... (C) has violated any provision of any law enforced by the Customs Service or the rules or regulations issued under any such provision." 19 U.S.C. § 1641(d)(1)(C).

Customs asserts that Ricci violated 19 C.F.R. § 111.29(a), which in 1990, when the violations occurred, provided:

Payment of duty, tax, or other debt or obligation owing to the Government for which the broker is responsible, or for which the broker has received payment from a client, shall be made to the Government on or before the date that payment is due. Payments received by a broker from a client after the due date shall be transmitted to the Government within 5 working days from receipt by the broker.

19 C.F.R. § 111.29(a).

The statute limits the amount of monetary penalty the Secretary may impose to $30,000, but does not set forth the criteria by which the Secretary must determine the amount of penalty. 19 U.S.C. § 1641(d)(2)(A). Similarly, the regulation under which Customs enforces the statutory provision, 19 C.F.R. section 111.91 sets forth the $30,000 limit without a means of determining the actual amount of the penalty ... Customs assesses monetary penalties for failure to make timely payments pursuant to a set of guidelines that do not have the force of a statute or regulation. See 19 C.F.R. Part 171, App. C, V.D.2. That provision states that the "assessment amount" shall be "an amount equal to the value of any monies up to a maximum of $30,000...." Id. A similar provision states that there is "(n)o mitigation from an intentional violation." 19 C.F.R. Part 171, App. C, V.D.5.

19 U.S.C. section 1641(d)(2)(A) also provides for notice to the subject broker and opportunities for the broker to respond to charges against him:

[T]he appropriate customs officer shall serve notice in writing upon any customs broker to show cause why the broker should not be subject to a monetary penalty not to exceed $30,000 in total for a violation or violations of this section. The notice shall advise the customs broker of the allegations or complaints against him and shall explain that the broker has a right to respond to the allegations or complaints in writing within 30 days of the date of the notice. Before imposing a monetary penalty, the customs officer shall consider the allegations or complaints and any timely response made by the customs broker and issue a written decision. A customs broker against whom a monetary penalty has been issued under this section shall have a reasonable opportunity under section 1618 of this title to make representations seeking remission or mitigation of the monetary penalty. Following the conclusion of any proceeding under section 1618 of this title, the appropriate customs officer shall provide to the customs broker a written statement which sets forth the final determination and the findings of fact and conclusions of law on which such determination is based.

19 U.S.C. § 1641(d)(2)(A).

Section 1618 grants the Secretary of the Treasury discretion to remit or mitigate monetary penalties under several provisions governing customs, including the broker discipline provision. 19 U.S.C. § 1618. It should be noted, however, that courts have interpreted this grant of discretion to eliminate judicial review of section 1618 mitigation. "It is well-settled that decisions concerning mitigation and remission under 19 U.S.C. § 1618 are committed to the discretion of the executive and are not subject to judicial review." Trayco, Inc. v. United States, 994 F.2d 832, 838 (Fed.Cir.1993). "Actions taken by the Secretary under § 1618 are purely a matter of discretionary grace." Kuehne & Nagel, Inc. v. United States, 17 Cl.Ct. 11, 18 (1989). This does not prevent a broker from challenging the legality of the underlying penalty, however. See Trayco, 994 F.2d at 838-39.

B. Application of the Law to the Facts

Customs audited Ricci's records after his firm had submitted five non-negotiable checks for payment of duties. Plaintiff's Memorandum In Support of Its Cross-motion for Summary Judgment ("Plaintiff's Memorandum") Appendix at 7. The audit included tests of accounting records and other documents of Pier International, performed according to "generally accepted government auditing standards." Id.⁴ at 9.

In pertinent part, the audit revealed 169 entries from June 1 through October 31, 1990, where Ricci failed to file entry summary and/or pay duties in a summary fashion. Id. at 10. Of these entries, 145 were violations by Ricci of 19 C.F.R. § 111.29(a), grouped as follows⁵:

• 135 instances in which the importer paid Ricci timely but he failed to pay Customs on or before the due date, involving a total of $351,398.78.

• 10 instances in which the importer paid Ricci late, and Ricci failed to pay Customs within five working days of receipt of the duties, involving a total of $19,845.49.

Id. at 11. The total value of...