United States v. BBS Electronics Intern. Inc.

• Decision Date: 21 November 1985
• Docket Number: No. 81-12-01643.,81-12-01643.
• Citation: 9 CIT 561,622 F. Supp. 1089
• Parties: UNITED STATES of America, Plaintiff, v. B.B.S. ELECTRONICS INTERNATIONAL INC., and Peerless Insurance Co., Defendants.
• Court: U.S. Court of International Trade

622 F. Supp. 1089

9 CIT 561

UNITED STATES of America, Plaintiff, v. B.B.S. ELECTRONICS INTERNATIONAL INC., and Peerless Insurance Co., Defendants.

No. 81-12-01643.

United States Court of International Trade.

November 21, 1985.

Richard K. Willard, Acting Asst. Atty. Gen., Washington, D.C., Joseph I. Liebman, Attorney in Charge, International Trade Field Office (John J. Mahon, New York City, on brief), for plaintiff.

Tomas Greenberger, for defendant B.B.S. Electronics Intern. Inc.

Gottesman, Wolgel, Smith & Secunda, P.C. (Lawrence L. Flynn), New York City, for defendant Peerless Ins. Co.

MEMORANDUM OPINION AND ORDER

RE, Chief Judge:

In this action, brought pursuant to 28 U.S.C. § 1582(2)(1982), plaintiff, the United States, seeks to recover $9,481.50 as liquidated damages, jointly and severally, from defendants B.B.S. Electronics International Inc. (BBS), and Peerless Insurance Co. (Peerless), under the terms of an Immediate Delivery and Consumption Entry Bond.

The parties are before the Court on a series of motions and cross-motions. Both defendants move to dismiss plaintiff's complaint for failure to prosecute. In addition, Peerless alleges an affirmative defense that the complaint against it should be dismissed for lack of in personam jurisdiction. Also before the court is plaintiff's cross-motion for summary judgment.

The following questions are presented:

First, whether plaintiff's action should be dismissed because of lack of prosecution; second, whether Peerless waived its jurisdictional objection by asserting in its answer a cross-claim against BBS, or by failing to include the objection in its motion to dismiss; and, finally, whether plaintiff is entitled to summary judgment as a matter of law.

After careful consideration of the arguments of the parties, the pleadings, and supporting papers, it is the determination of the Court that the action is not subject to dismissal for lack of prosecution. The Court also holds that since Peerless interposed a valid jurisdictional defense which was not waived, plaintiff's action against Peerless is dismissed. Finally, plaintiff's motion for summary judgment against BBS is hereby granted.

Facts

On June 10, 1975, BBS entered 24 cases of color television sets through the port of New York. The imported merchandise was valued at $9,030.00, and the duty was calculated to be $451.50. On June 11, 1975, BBS, as principal, and Peerless, as surety, duly executed and delivered to the United States an Immediate Delivery and Consumption (Single) Entry Bond. Pursuant to the terms of the bond, the defendants jointly and severally guaranteed that all duties, taxes, and liquidated damages due plaintiff as a result of the entry of the merchandise would be paid. The bond also provided that, if the merchandise was found to be in violation of the laws and regulations governing its admission into the United States, BBS would, after proper notice, export the television sets under the supervision of the Customs Service. If BBS failed to comply with the terms of the bond, it agreed to pay to the district director of customs as liquidated damages, an amount equal to the value of the merchandise, plus the estimated duties, that is, $9,481.50.

On June 23, 1975, the merchandise was conditionally released by the Customs Service to BBS. BBS was directed to keep the shipment intact. On September 9, 1975, BBS was duly notified that the color television sets were in violation of section 360(a) of the Radiation Control for Health and Safety Act of 1968, 42 U.S.C. § 263h, and, therefore, they had to be exported under the supervision of the Customs Service within 90 days. BBS failed to export the television sets in compliance with the notice.

On December 8, 1981, pursuant to section 1582 of title 28 U.S.C., plaintiff, United States, commenced this action seeking to recover $9,481.50 as liquidated damages, plus interest. Plaintiff filed an amended complaint on March 2, 1982. BBS did not respond to the amended pleading.

Lack of Prosecution

On June 13, 1984, BBS moved pursuant to Rule 41(b) of the Rules of this Court to dismiss plaintiff's action for lack of prosecution. By affidavit, Peerless joined in this motion. In its memorandum which accompanied the motion, BBS argued that dismissal was proper because plaintiff had not proceeded "diligently with trying this action on the merits." BBS noted that plaintiff had waited until the last day within the statute of limitations to commence the suit, a full 6 years after the cause of action accrued. BBS also contended that, for more than 2 years after commencing the action, plaintiff "shelved" the file. In essence, BBS argues that, in all cases, dismissal for failure to prosecute under Rule 41 is mandatory "where no action has been taken for 12 months." This argument is without merit.

Plaintiff's motion is properly addressed to Rule 41(b)(2), which, before its current amendment, read as follows:

Whenever it appears that an assigned action is not being prosecuted with due diligence, the court may, upon its own initiative after notice, or upon motion of a defendant, order the action dismissed for lack of prosecution.

U.S.C.I.T. R. 41(b)(2).

Dismissal under Rule 41(b)(2) of the Rules of this Court is discretionary. See Silver Reed America, Inc. v. United States, 5 CIT 279, 280, 565 F. Supp. 1047, 1048 (1983); cf. Link v. Wabash R.R., 370 U.S. 626, 629-31, 82 S.Ct. 1386, 1388-89, 8 L.Ed.2d 734 (1961). In general terms, it may be said that the Court will not dismiss an action in the absence of a showing of a clear pattern of delay, contumacious conduct, or failure to comply with orders of the Court. See e.g., Silver Reed America, Inc., supra, 5 CIT at 281, 565 F. Supp. at 1049.

In this case, the Court holds that BBS has not persuaded the Court that the extreme sanction of dismissal is warranted. BBS does not allege that plaintiff has failed to comply with any orders of the court or engaged in contumacious conduct. BBS argues simply that plaintiff's case should be dismissed because too much time has elapsed since its initiation. Although plaintiff's laxness in prosecuting this action may not meet with the Court's approval, the Court notes the settlement discussions that have taken place between Peerless and the plaintiff, and that there has been at least one substitution of counsel. Under the circumstances of this case, the motion to dismiss for lack of prosecution is denied.

Lack of Jurisdiction

Plaintiff admits that it failed properly to serve Peerless. As a result of the improper service, in its amended answer, Peerless interposed the defense of lack of in personam jurisdiction, and asserted a cross-claim against BBS in indemnity. Plaintiff argues that, by including the cross-claim in its answer, Peerless effectively waived the jurisdictional defense.

Whether the defense of lack of in personam jurisdiction is waived by a defendant who asserts the defense contemporaneously with a cross-claim is a novel question for this Court. Hence, it is helpful to seek guidance from the other federal courts which have interpreted and applied the Federal Rules of Civil Procedure. The federal courts, however, are divided and have not answered this question uniformly. Globig v. Greene & Gust Co., 193 F. Supp. 544, 549 (E.D. Wis. 1961); Recent Development, 59 Colum. L. Rev. 1093, 1094 (1959). Compare Chase v. Pan-Pacific Broadcasting, Inc., 750 F.2d 131, 133 (D.C. Cir. 1984) (no waiver) with Merz v. Hemmerle, 90 F.R.D. 566, 569 (E.D.N.Y. 1981) (waiver). After careful examination of the applicable rules and case law, this Court holds that by asserting in its answer a cross-claim against BBS, Peerless did not waive its jurisdictional objection of lack of in personam jurisdiction.

Prior to the enactment of the Federal Rules of Civil Procedure, the rule pertaining to the combining of counterclaims and jurisdictional objections was enunciated by Justice Holmes in Merchants Heat and Light Co. v. J.B. Clow & Sons, 204 U.S. 286, 27 S.Ct. 285, 51 L.Ed. 488 (1907). In Merchants Heat, the defendant claimed that it was improperly served with process. Although the Court "intimated no opinion either way" on the issue of improper service, it held that the defendant submitted to the jurisdiction of the trial court by combining a counterclaim with its objection to service of process. Id. at 289, 27 S.Ct. at 285. Justice Holmes, writing for the Court, stated:

By setting up its counterclaim the defendant became a plaintiff in its turn, invoked the jurisdiction of the court in the same action and by invoking submitted to it.

Id.

Since the adoption of the Federal Rules in 1938, virtually all of the courts which have considered this question have cited the language of Merchants Heat. E.g., Neifeld v. Steinberg, 438 F.2d 423, (3d Cir. 1971); North Branch Products v. Fisher, 284 F.2d 611, 615 n. 8 (D.C. Cir. 1960); see Note, Federal Rules of Civil Procedure: Curing an Apparent Waiver of Jurisdictional Defenses, 32 Md.L.Rev. 156 (1972). Some courts have resolved the issue by distinguishing permissive and compulsory counter-claims, cross-claims, and third-party claims. E.g., Gates Learjet Corp. v. Jensen, supra, 743 F.2d 1325, 1330 n. 1 (9th Cir. 1984), cert. denied, ___ U.S. ___, 105 S.Ct. 2143, 85 L.Ed.2d 500 (1985) (84-1590); Globig v. Greene & Gust Co., supra, 193 F.Supp. at 548-49; see also 5 C. Wright & A. Miller, Federal Practice and Procedure § 1397 (1969 & Supp. 1985). The common question in all of these cases, however, was whether the "procedural rule enunciated in Merchants Heat and Light Co. was changed by the Federal Rules of Civil Procedure." Neifeld v. Steinberg, supra, 438 F.2d at 427; see also Lomanco Inc. v. Missouri Pacific R.R., 566 F.Supp. 846, 849 (E.D. Ark. 1973). It is the determination of this Court that the rule articulated in Merchants Heat has been changed by the adoption of the Federal Rules.

Rule 12 of the rules of this Court, which is...