U.S. v. Ups Customhouse Brokerage, Inc.

Decision Date19 October 2006
Docket NumberSlip Op. 06-156. Court No. 04-00650.
Citation464 F.Supp.2d 1364
PartiesUNITED STATES, Plaintiff, v. UPS CUSTOMHOUSE BROKERAGE, INC., dba UPS Supply Chain Solutions, Inc., Defendant.
CourtU.S. Court of International Trade

Peter D. Keisler, Assistant Attorney General, David M. Cohen, Director, Patricia M. McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice (Melinda D. Hart, Nancy Kim), Edward Greenwald, Department of Homeland Security, Bureau of Customs and Border Protection, Of Counsel, for Plaintiff.

Akin, Gump, Strauss, Hauer & Feld, LLP (Lars-Erik Hjelm, Lisa W. Ross, and Thomas J. McCarthy), Washington, DC, for Defendant.

Tompkins & Davidson, LLP (Laura Siegel Rabinowitz), New York City, for Amicus (National Customs Brokers & Freight Forwarders Association of America, Inc.).

OPINION & ORDER

CARMAN, Judge.

This matter is before this Court on Defendant's Motion to Amend and Certify Order for Interlocutory Appeal and for Stay of the Proceeding Pending Appeal ("Defendant's Motion to Certify"). Plaintiff filed a response to Defendant's Motion to Certify in Plaintiffs Opposition to Defendant's Motion to Amend and Certify Order for Interlocutory Appeal and for Stay of the Proceeding Pending Appeal ("Plaintiffs Response"). Thereafter, Defendant filed Defendant's Motion for Leave to File a Reply to Plaintiffs Opposition to Defendant's Motion for Amendment and Certification of Order for Interlocutory Appeal and Defendant's Motion for Oral Argument ("Defendant's Reply"). This Court, having considered all of the papers and arguments contained therein, after due deliberation, and for the reasons set forth herein, grants Defendant's Motion to Certify, together with Defendant's motions to stay proceedings and for leave to file a reply brief. The parties having ably and clearly set forth their arguments in their papers this Court denies Defendant's motion for oral argument.

PROCEDURAL HISTORY

The factual and procedural history of this matter are fully addressed in this Court's prior opinion in this matter, U.S. v. UPS Customhouse Brokerage, Inc., 442 F.Supp.2d 1290, 30 CIT — (CIT 2006) ("UPS I"). This Court presumes familiarity with the UPS I opinion. Briefly, the Bureau of Customs and Border Protection ("Plaintiff' or "Customs") imposed a series of separate penalties against Defendant, UPS Customhouse Brokerage, Inc. ("UPS" or "Defendant"), for alleged violations of the broker's statutory obligation to exercise responsible supervision and control. The alleged violations each related to UPS's failure, after repeated counselling and warning by Customs, to properly classify certain computer equipment. Defendant remitted payment for three of the penalty notices but failed to satisfy other penalty notices, and this action ensued.

The substantive legal issue before this Court in UPS I was "the meaning of the statutory phrase `a monetary penalty not to exceed $30,000 in total for a violation or violations of 19 U.S.C. § 1641(d)(1)."1 UPS I, at 1307 (quoting section 641(d)(2)(A) of the Tariff Act of 1930, 19 U.S.C. § 1641(d)(2)(A) (2000)) ("§ 1641(d)(2)(A)").2 With regard to this issue, Defendant filed a motion for summary judgment seeking to limit the amount of penalties to which it would be subject. This Court, in UPS I, rejected Defendant's claims. Id. at 1307-11. Defendant, being dissatisfied with the Court's holding in UPS I, filed its Motion to Certify. While this Court is confident in its reasoning and holding in UPS I, the substantive question of law presented therein nevertheless satisfies the requirements necessary to be certified for interlocutory appeal to the Court of Appeals for the Federal Circuit ("CAFC"). A Court of International Trade ("CIT") judge may certify an order not otherwise immediately appealable provided "a controlling question of law is involved with respect to which there is a substantial ground for difference of opinion and that an immediate appeal from that order may materially advance the ultimate termination of the litigation." 28 U.S.C. § 1292(d)(1) (2000) (" § 1292(d)").

PARTIES' CONTENTIONS
I. Defendant's Contentions

Defendant asks this Court to certify the following question for immediate appeal to the CAFC:

Whether, under 19 U.S.C. §§ 1641(b)(4)3 and (d)(2)(A), a Customs broker's alleged failure to exercise responsible supervision and control on the basis of a pattern of entries reflecting the same tariff classification error gives rise to one, or more than one, penalty; and whether there is any limitation on the total penalty amount for the allegedly misclassified entries resulting therefrom.

(Mem. in Supp. of Def.'s Mot. to Amend & Certify Order for Interlocutory Appeal & for Stay of the Proceeding Pending Appeal ("Def.'s Mem.") 1 (footnote added).) Defendant defines the issue for certification to the CAFC as "whether Plaintiff may assess more than a single penalty for [UPS's] alleged failure to exercise responsible supervision and control over the classification of computer parts." (Def.'s Reply to Pl.'s Opp'n to Def.'s Mot. for Amendment & Certification of Order for Interlocutory Appeal ("Def.'s Reply") 3-4.) According to Defendant, resolution of this issue "goes directly to the heart of whether Defendant is liable for any additional penalties in this case." (Id. at 4.)

In satisfaction of the first requirement of § 1292(d), Defendant argues that a controlling question of law is presented in UPS I because "[i]f the [CAFC] agrees with Defendant that Plaintiff has alleged a single violation, namely the failure to exercise responsible supervision and control ... over the classification of computer parts, it follows that only a single penalty is warranted." (Def.'s Mem. 8.) If so, Defendant claims that Plaintiff would then be unable to maintain this action because "Customs has already collected a penalty for the alleged failure to exercise responsible supervision and control over the classification of computer parts." (Id.) At a minimum, Defendant argues that there is a controlling question of law concerning the maximum amount of penalties Customs may seek through a single penalty notice or multiple penalty notices. (Id.)

Next, Defendant claims that the second requirement of § 1292(d) — that there exist a substantial ground for difference of opinion — is met. (Id. 8-9.) Defendant alleges that UPS I conflicts with an earlier CIT case, United States v. Ricci, 985 F.Supp. 1145, 21 CIT 1145 (1997). Defendant takes issue with UPS I for distinguishing Ricci because the penalty issued therein — unlike in the matter before this Court — was the result of an audit by Customs. (Def.'s Mem. 9.) Defendant asserts that the audit provisions of the Customs penalty mitigation guidelines ("mitigation guidelines") were not invoked in Ricci and, therefore, were not a means by which to distinguish the case in UPS I. (Id. at 9.) Defendant also suggests that this Court should not have referenced the audit provisions of the mitigation guidelines because they "`do not have the force of a statute or regulation.'" (Id.) (quoting Ricci, 985 F.Supp. 125, 21 CIT at 1147).4 Defendant maintains that Ricci established that § 1641(d)(2)(A) does not permit Customs to issue more than one penalty for more than one violation of a broker's statutory obligations. (Def.'s Reply 7.) To the extent that UPS I and Ricci differ in this regard, Defendant urges that there exists a difference of opinion ripe for resolution on interlocutory appeal.

In discussing the third requirement of § 1292(d), Defendant postulates that an interlocutory appeal of UPS I will "expeditiously settle the most significant legal principle at stake in this dispute." (Def.'s Mem. at 10.) Defendant seems to imply that resolution of this issue also may result in settlement or at least renewed settlement discussions between the parties. (See Id. at 11; Def's Reply 9.) Defendant further contends that there remain "significant and genuine issues of material fact" regarding Plaintiffs underlying claims. (Def.'s Mem. 12.) According to Defendant, the "significant expense" of trial concerning the outstanding factual issues might be "avoided completely by certification of immediate appeal." (Id.) Defendant insists that "the question for certification goes directly to the issue of [UPS's] liability for additional penalty payments and provides the basis for extinguishing Plaintiffs claim in its entirety." (Def.'s Reply 8.) Defendant adds that

The issue for certification is a pure question of law that requires the [CAFC] to rule on the meaning of the statute and applicable regulations. As such, it is one that can be decided relatively quickly and which may avoid a lengthy and time-consuming trial for both parties.

(Id. at 9.) Defendant further asserts "that the alternative to immediate review is to proceed with a costly trial, and possible retrial, of significant factual issues of liability and penalty exposure that can be entirely avoided by an interlocutory appeal at this stage." (Id.) Defendant also notes that the issue raised in UPS I is one of first impression and "has a potentially significant and wide-reaching impact on the entire customs brokerage industry." (Def.'s Mem. 10.)

With regard to staying the proceedings, Defendant states that neither Plaintiff nor Defendant will be prejudiced by delaying the proceedings pending appeal. (Def.'s Reply 10.) Defendant notes that Plaintiff proposed that the trial in this matter be rescheduled for March 2007. (Id.) According to Defendant, "Plaintiffs contention that a stay of proceedings pending appeal `would prejudice the Government's interest in a speedy resolution of its claim' is simply baseless." (Id. (citation omitted).) Defendant reasons that "Plaintiffs opposition to certification of this issue — which is more attributable to a desire to avoid `potential reversal than by a concern for a speedy resolution of this...

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