U.S. v. Rubinstein
| Decision Date | 10 August 1999 |
| Docket Number | Slip Op. 99-78.,Court No. 86-07-00935. |
| Citation | 62 F.Supp.2d 1139 |
| Parties | UNITED STATES, Plaintiff, v. David M. RUBINSTEIN, S.G. Import and Export, Inc., La Petite Gold, Inc., Unique Enterprises, Inc., and Washington International Insurance Company, Defendants. |
| Court | U.S. Court of International Trade |
David W. Ogden, Acting Assistant Attorney General; David M. Cohen, Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice (A. David Lafer, Senior Trial Counsel and Jeffrey A. Belkin, Trial Attorney, of counsel); David Goldfarb, Assistant Chief Counsel, U.S. Customs Service, Seattle, WA, for plaintiff.
Sandler, Travis & Rosenberg, Glad & Ferguson, P.C. (T. Randolph Ferguson, of counsel); John M. Daley, Washington, DC, for defendant Washington International Ins. Co.
This is an action commenced by the United States (the "Government" or "plaintiff") more than thirteen years ago — on July 23, 1986 — pursuant to 19 U.S.C. § 1592(d) for the recovery of $416,639.26, plus interest.1 The sum plaintiff seeks to recover represents an alleged loss of customs duties (plus interest) on five entries of various pieces of gold jewelry at the port of Seattle, Washington between September and December 1981, nearly eighteen years ago.
The gravamen of plaintiff's complaint is that David M. Rubinstein and the corporate defendants, S.G. Import and Export, Inc. (S.G.Import), La Petite Gold, Inc. (La Petite), and Unique Enterprises, Inc. ("Unique"), submitted fraudulent documentation to U.S. Customs at Seattle in connection with the five entries, allegedly resulting in undervaluation of the jewelry in one entry, and with respect to the other four entries, resulting in an erroneous assessment of duty on less than the full value of the goods. Defendant Washington International Insurance Company ("Washington") is the surety designated in the entry bonds posted in the five entries at Seattle some eighteen years ago.
Jurisdiction of this action is under 28 U.S.C. § 1582. Presently before the court is Washington's motion seeking dismissal of this case for failure of the Government to prosecute with due diligence in accordance with USCIT Rule 41(b)(3). That rule provides: "Whenever it appears that an action is not being prosecuted with due diligence, the court may upon its own initiative after notice, or upon motion of defendant, order the action dismissed for lack of prosecution."
For the reasons set forth below, the appropriate exercise of the court's discretion requires that the action be dismissed for failure to prosecute. Since the Government is the plaintiff, dismissal of this § 1592(d) action for lack of diligent prosecution appears to be a dismissal on that ground of first impression.
The genesis of this litigation is five entries of gold jewelry at the port of Seattle, Washington between September and December 1981. Plaintiff claims that in connection with the first entry, made on September 22, 1981, the importer fraudulently understated the value of the jewelry by approximately $13,000, causing a loss of duties. Plaintiff further claims that in connection with making the remaining four Seattle entries, the importer falsely represented, by forged documentation, that the imported jewelry had previously been exported to Italy for repairs to obtain the duty allowance provided by item 806.2040, TSUS (duties are assessed on imported merchandise previously exported for repairs only on the cost of the foreign repairs rather than on the full value of the merchandise).
Plaintiff further avers that during the pendency of a fraud investigation into the 1981 Seattle entries, Rubinstein was under criminal prosecution in the Central District of California (Los Angeles) in connection with "almost identical" jewelry importations at the port of Los Angles, and ultimately pleaded guilty to violating 18 U.S.C. §§ 2 and 1001 for making false statements in connection with importations. Rubinstein served a short prison sentence in California, and according to plaintiff, upon Rubinstein's release from prison in 1986, he immediately left the United States for Israel. S & G Import, the corporate entity that had imported the jewelry at Seattle and had executed the entry bonds in 1981, was dissolved in January 1982. The Los Angeles importers, La Petite and Unique, were later dissolved in 1984.
Respecting the Los Angeles transactions, besides the criminal proceedings mentioned above, in 1986 the Government brought a civil action, United States v. David M. Rubinstein, et al., Court No. 86-12-01543, in which a default judgment was entered against Rubinstein and the Los Angeles importers, La Petite and Unique. The surety on the bonds for the Los Angeles entries, Peerless Insurance Company, settled the civil action with the Government on November 22, 1989.
As for the 1981 Seattle transactions, the Government commenced this action on July 23, 1986. On August 18, 1986, Washington filed its answer and cross-claims against the co-defendants, Rubinstein, S.G. Import, La Petitite, and Unique. Two years later, on February 19, 1988, the Government obtained a default judgment against Rubinstein (who, as previously stated, had gone to Israel in 1986), S.G. Import, La Petite, and Unique (which defendants by 1986 were long out of business) in the amount of $416,639.26, plus interest. The Government and Washington then agreed to stay proceedings until the Federal Circuit rendered its decision in United States v. Blum, 858 F.2d 1566 (Fed.Cir.1988) ().
Following the Blum decision by the Federal Circuit in 1988, favorable to the Government (it could sue a surety for loss of duties pursuant to § 1592(d) where there had been a violation by the importer under § 1592(a)), the Government took no further action to prosecute this case for the next two years — until October 2, 1990. On that date, the Government served interrogatories and requests for production of documents on Washington, which responded on January 4, 1991.
After that, the Government took virtually no further action of any significance to prosecute this case for nearly nine years — from 1990 to May 3, 1999, on which date the Government moved to strike Washington's affirmative defenses that Washington had pleaded in its 1986 answer. Plaintiff's motion to strike is also sub judice.
On May 23, 1999, Washington filed its motion to dismiss this action for lack of prosecution in accordance with USCIT Rule 41(b)(3).
The Government readily admits that during the 1990-99 period the case was always assigned to an attorney (in fact there had been a succession of four), and that administrative errors in the Department's case tracking system resulted in losing track of the case for nine years. (Plt'fs Memorandum Opposing Washington's Motion to Dismiss for Lack of Prosecution, at 4, fn. 3). Current Government counsel advises the court that prior Government attorneys assigned to the case could not recall the matter. Decl. of Jeffrey A. Belkin at 1. It is fair to state that after 1990, this case simply "fell through the cracks."
In support of its motion to dismiss, Washington maintains that the Government failed to diligently prosecute this case for an unreasonable period — nine years — and that such delay has presumptively and actually prejudiced Washington. Therefore, Washington moves to dismiss for lack of prosecution.
The Government contends that dismissal should be denied because: (1) Washington experienced no actual prejudice because of delay by the Government; (2) in any event, any prejudice to Washington was due to its failure to prosecute its cross-claims and to seek discovery from the Government; (3) the Government is now actively engaged in searching for witnesses; (4) less drastic remedies are available to the court; (5) for the same reasons that courts have limited the application of laches and equitable estoppel to Governmental action seeking to enforce a "public right," Washington should be held an even higher burden of proving actual prejudice; (6) due process favors permitting the Government to maintain this case.
THE COURT HAS DISCRETIONARY AUTHORITY UNDER USCIT RULE 41(b)(3) TO DISMISS FOR FAILURE TO PROSECUTE.
It is well settled that dismissal for failure to prosecute is discretionary; the exercise of such discretion is reversed on appeal only for manifest or gross abuse of discretion. Walker International Corp. v. United States, 554 F.2d 464, 64 C.C.P.A. 111 (1977); United States v. Chas. Kurz Co., 396 F.2d 1013, 55 C.C.P.A. 107 (1968).
In Kurz, the appellate court held that the trial judge's dismissal for failure to prosecute under former Rule 5(b) of the Customs Court was not arbitrary or capricious, and was within the discretionary authority of the trial judge. See also ILWU Local 142 v. Donovan, 15 C.I.T. 584, 585 (1991), citing United States v. Chas. Kurz Co., supra; A. Hirsh, Inc. v. United States, 12 CIT 721, 723 (1988); United States v. B.B.S. Electronics International, Inc., 9 CIT 561, 563, 622 F.Supp. 1089, 1091-92 (1985); United States v. Joan and David Helpern Co., 9 CIT 275, 611 F.Supp. 985 (1985); Silver Reed America, Inc. v. United States, 5 CIT 279, 565 F.Supp. 1047 (1983), rev'd on other grounds sub nom. Consumer Products Div., SCM Corp. v. Silver Reed America, Inc., 753 F.2d 1033 (1985).
Dismissal for lack of prosecution is, of course, a drastic sanction, which should be imposed sparingly. A. Hirsh, 12 CIT at 723. An action will not be dismissed "in the absence of a showing of a clear pattern of delay, contumacious conduct, or failure to comply with orders of the Court." Id.
No exact rule can be laid down, and each case must be looked at with regard to its own...
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