U.S. v. Tri-State Hosp. Supply Corp., Slip Op. 99-107.

• Court: U.S. Court of International Trade
• Writing for the Court: Wallach
• Citation: 74 F.Supp.2d 1311
• Parties: UNITED STATES, Plaintiff, v. TRI-STATE HOSPITAL SUPPLY CORP., Defendant.
• Docket Number: Court No. 97-04-00678.,Slip Op. 99-107.
• Decision Date: 08 October 1999

74 F.Supp.2d 1311 UNITED STATES, Plaintiff,
v.
TRI-STATE HOSPITAL SUPPLY CORP., Defendant. Slip Op. 99-107. Court No. 97-04-00678. United States Court of International Trade. October 8, 1999.

David Ogden, Acting Assistant Attorney General; David M. Cohen, Director; U.S. Department of Justice, Civil Division, Commercial Litigation Branch (Michele D. Lynch and Lucius B. Lau); A. David Lafer, Senior Trial Attorney, for plaintiff.

Akin, Gump, Strauss, Hauer & Feld, L.L.P. (John M. Dowd and Joseph P. Esposito, P.C.) for defendant.

OPINION

WALLACH, Judge.

I INTRODUCTION

This case comes before the Court on Plaintiff's Motion In Limine, which requests a pre-trial ruling that allegedly false statements made by Defendant to the United States Customs Service ("Customs") are "material" pursuant to 19 U.S.C. § 1592(a) as a matter of law. For the reasons stated below, the Court finds that the materiality of Defendant's allegedly false statements is a mixed question of law and fact which should be placed before a civil jury. Accordingly, the Court denies Plaintiff's Motion In Limine.

Page 1312

II BACKGROUND

According to Plaintiff, from April 1990 through March 1994, Defendant, Tri-State Hospital Supply Corporation, imported assorted surgical instruments from Pakistan by means of false representations and omissions that caused the purchase prices of these instruments to be overstated. Plaintiff's Compl. ¶¶ 5, 7. Although these alleged overstatements and omissions did not deprive the United States of revenues (and, indeed, the merchandise at issue qualified for duty-free treatment under the Generalized System of Preferences ("GSP")), Plaintiff alleges that these representations were "material" for purposes of 19 U.S.C. § 1592 insofar as they (a) had the potential to affect the appraisement of the merchandise that was imported; (b) had the potential to affect Pakistan's continuing eligibility for GSP preferred status; and (c) prevented the compilation of accurate trade statistics by Customs and the U.S. Department of Commerce. Compl. ¶ 9. Accordingly, Plaintiff has charged Defendant with having committed negligent, grossly negligent, and fraudulent violations of 19 U.S.C. § 1592(a),¹ for which Defendant is potentially liable for civil penalties. A jury trial on Defendant's liability is scheduled to begin in this Court on October 12, 1999.

On June 28, 1999, Plaintiff submitted its Motion In Limine,² seeking a ruling that Defendant's allegedly false representations to Customs are "material" as a matter of law under 19 U.S.C. § 1592(a)(1).³ It is this Motion which is before the Court.

Page 1313

III ANALYSIS A

United States v. Gaudin Requires a Reexamination of How This Court Treats Materiality Under 19 U.S.C. § 1592(a)(1).

At first glance, the question of whether materiality under 19 U.S.C. § 1592(a)(1) is a question of law for the Court, or a question of fact for a jury in the forthcoming trial on Defendant's liability, appears wellsettled. As Plaintiff observes, this Court has repeatedly stated that the issue of materiality under 19 U.S.C. § 1592(a)(1) is an issue of law to be decided by the Court. See United States v. Rockwell Int'l Corp., 10 CIT 38, 42, 628 F.Supp. 206, 209-10 (1986); United States v. Daewoo Int'l (America) Corp., 12 CIT 889, 895, 696 F.Supp. 1534, 1540 (1988), modified 13 CIT 76, 704 F.Supp. 1067 (1988); United States v. Modes, 16 CIT 879, 884, 804 F.Supp. 360, 365 (1992); United States v. Menard, 16 CIT 410, 417, 795 F.Supp. 1182, 1188 (1992); United States v. Hitachi America, Ltd., 964 F.Supp. 344, 360 (CIT 1997), aff'd in part and rev'd in part, 172 F.3d 1319 (Fed.Cir.1999); United States v. Pentax Corp., 69 F.Supp.2d 1361, 1362-64 (CIT). Cf. United States v. Almany, 1998 WL 299345 at *3 (CIT) (granting summary judgment without characterizing materiality as a question for the trier of fact).

Defendant, however, challenges the continuing reliability of these cases, arguing, inter alia, that they simply cite, without any analysis, United States v. Rockwell Int'l Corp., supra. According to Defendant, the foundation underlying Rockwell has been undermined by the Supreme Court's opinion in United States v. Gaudin, 515 U.S. 506, 115 S.Ct. 2310, 132 L.Ed.2d 444 (1995), which expressly repudiated the decision upon which Rockwell's holding was based, Sinclair v. United States, 279 U.S. 263, 49 S.Ct. 268, 73 L.Ed. 692 (1929). Defendant's Response⁴ at 11. Thus, Defendant argues, because this Court's precedents "are based on a case since repudiated by the Supreme Court, it would be appropriate for this Court to accord them little if any weight and instead to reexamine the materiality issue." Id.

Although this Court is not bound by Rockwell and its progeny, Algoma Steel Corp. v. United States, 865 F.2d 240, 243 (Fed.Cir.1989), they are persuasive authority on the issue of whether materiality is, in the first instance, a question for the Court or the jury.⁵ Cf. Krupp Stahl A.G. v. United States, 15 CIT 169, 173 (1991) (" [A]bsent unusual or exceptional circumstances, it would appear to be better practice for judges of this court to follow the prior opinions of this court."). In this

Page 1314

case, however, the Court finds that, because the underlying authority and rationale of these cases has been vitiated, it must begin its analysis anew.

The precedent here at issue stems directly from Rockwell.⁶ In Rockwell, 10 CIT at 42, 628 F.Supp. at 209-10, the Court stated that "[a] question of materiality involves a legal issue to be decided by the Court," and cited as authority for this proposition Sinclair v. United States, 279 U.S. 263, 298-99, 49 S.Ct. 268, 73 L.Ed. 692 (1929), and United States v. Ackerman, 704 F.2d 1344, 1347, reh'g denied 719 F.2d 1282 (5th Cir.1983). In Sinclair, an appeal of a criminal conviction for "refus[ing] to answer any question pertinent to the question under inquiry" before Congress, the Supreme Court stated:

The question of pertinency ... was rightly decided by the court as one of law. It did not depend upon the probative value of evidence. That question may be likened to those concerning relevancy at the trial of issues in court, and it is not essentially different from the question as to materiality of false testimony charged as perjury in prosecutions for that crime. Upon reasons so well known that their repetition is unnecessary it is uniformly held that relevancy is a question of law. And the materiality of what is falsely sworn, when an element in the crime of perjury, is one for the court.... It would be incongruous and contrary to well-established principles to leave the determination of such a matter to a jury.

Sinclair, 279 U.S. at 298-99, 49 S.Ct. 268 (citations omitted).

Similarly, in Ackerman, a Fifth Circuit opinion construing a criminal counterpart to 19 U.S.C. § 1592, 18 U.S.C. § 542 (importation of merchandise by means of false or fraudulent representation), the appellate court stated:

We hold, however, that the materiality requirement of § 542 involves a legal issue to be decided by the court. This interpretation of the statute conforms to that given to 18 U.S.C. § 1001, which proscribes the making of false statements to government agencies. As with § 542, the courts have read a requirement of materiality into § 1001 .... Under § 1001, "[t]he materiality of a statement rests upon a factual evidentiary showing but the ultimate decision is a legal one." United States v. Beer, 518 F.2d 168, 172 (5th Cir.1975). Likewise, under § 542, the ultimate decision as to whether a false statement is material is a legal rather than a factual issue.

Ackerman, 704 F.2d at 1347-48.

In United States v. Gaudin, the Supreme Court explicitly repudiated Sinclair's logic. In Gaudin, 515 U.S. at 511-23, 115 S.Ct. 2310, the Court found that, in a prosecution under 18 U.S.C. § 1001,⁷ the

Page 1315

question of the materiality of the false statements had to be submitted to the jury for resolution. In so holding, the Court reconciled its decision with Sinclair by noting that, to the degree the logic of Sinclair had not already been overruled, "we repudiate [it] now." Id. at 520, 115 S.Ct. 2310. The Court noted:

[Sinclair] said that the question of pertinency "may be likened to those concerning relevancy at the trial of issues in court," which "is uniformly held [to be] a question of law" for the court. 279 U.S., at 298, 49 S.Ct., at 273. But how relevancy is treated for purposes of determining the admissibility of evidence says nothing about how relevancy should be treated when (like "pertinence" or "materiality") it is made an element of a criminal offense. It is commonplace for the same mixed question of law and fact to be assigned to the court for one purpose, and to the jury for another.... That leaves as the sole prop for Sinclair its reliance upon the unexamined proposition, never before endorsed by this Court, that materiality in perjury cases (which is analogous to pertinence in contempt cases) is a question of law for the judge. But just as there is nothing to support Sinclair except that proposition, there is, as we have seen, nothing to support that proposition except Sinclair. While this perfect circularity has a certain esthetic appeal, it has no logic.

Id. at 520-21, 115 S.Ct. 2310.

Thus, one leg of this Court's "materiality" analysis in Rockwell—based, as it is, on Sinclair — is eliminated.

Ackerman, the other leg of Rockwell, has become an equally questionable proposition in light of Gaudin. As noted above, the Fifth Circuit supported its holding in Ackerman (that materiality in a 18 U.S.C. § 542 prosecution was a legal issue to be decided by the Court) by drawing an analogy to 18 U.S.C. § 1001.⁸ Gaudin, however, discredited the analogy by holding that the materiality requirement of 18 U.S.C. § 1001 is a mixed question of law and fact which the Constitution requires juries, and not the Court, to decide. Thus, Gaudin casts significant doubt upon the...