United States v. Chu-Chiang "kevin" Ho, & Atria Corp.

• Decision Date: 15 May 2020
• Docket Number: Slip Op. 20-66,Court No. 19-00038
• Citation: 452 F.Supp.3d 1371
• Parties: UNITED STATES, Plaintiff, v. Chu-Chiang "Kevin" HO, and Atria Corporation, Defendants.
• Court: U.S. Court of International Trade

452 F.Supp.3d 1371

UNITED STATES, Plaintiff,

v.Chu-Chiang "Kevin" HO, and Atria Corporation, Defendants.

Slip Op. 20-66

Court No. 19-00038

United States Court of International Trade.

May 15, 2020

William George Kanellis, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, D.C. for plaintiff. With him on the brief were Joseph H. Hunt, Assistant Attorney General, Robert E. Kirschman, Jr., Director and Patricia M. McCarthy, Assistant Director.

Elon A. Pollack and Kayla R. Owens, Stein Shostak Shostak Pollack & O'Hara, LLP, of Los Angeles, CA for defendant.

OPINION

Reif, Judge:

"We are all honorable men here, we do not have to give each other assurances as if we were lawyers." — Mario Puzo.¹

* * *

The United States of America ("Government" or "plaintiff") brings this enforcement action against Atria Corporation ("Atria") and Chu-Chiang "Kevin" Ho ("defendant") (together, "defendants") to recover penalties pursuant to 19 U.S.C. § 1592 (2012).² Defendant requests that the United States Court of International Trade ("USCIT" or "CIT") dismiss the Government's complaint against him in his individual capacity pursuant to USCIT Rules 12(b)(1), 12(b)(2), 12(b)(5) and 12(b)(6). Memorandum in Support of Defendant's Motion to Dismiss, ECF No. 4 ("Def. Mot. Dis."). Mr. Ho claims that: (1) the court lacks subject matter jurisdiction because plaintiff failed to exhaust its administrative remedies; (2) the court lacks personal jurisdiction over Mr. Ho due to insufficient service of process; and, (3) plaintiff fails to state a claim upon which relief can be granted. Def. Mot. Dis. at 1.

After review of the filings and applicable law, this court quashes plaintiff's service of process upon defendant and orders that plaintiff properly serve defendant within 60 days of this Order. The court also denies defendant's motion to dismiss pursuant to USCIT Rule 12(b)(1) for lack of subject matter jurisdiction.³ However, it is premature for the court to rule on defendant's motions to dismiss pursuant to USCIT Rules 12(b)(2), 12(b)(5) and 12(b)(6), because of the extension of time for service of process granted herein. Until service is effected, the court does not have personal jurisdiction over defendant. "Not only does logic compel initial consideration of the issue of jurisdiction over the defendant — a court without such jurisdiction lacks power to dismiss a complaint for failure to state a claim." I Mark Marketing Servs., LLC v. Geoplast S.p.A , 753 F. Supp. 2d 141, 149 (D.D.C. 2010) (citation omitted). Thus, at this time, the court "lacks power to dismiss a complaint for failure to state a claim" pursuant to USCIT Rule 12(b)(6). Id. (referring to the analogous FRCP 12(b)(6) ); see also Norberg v. Shutterfly, Inc. , 152 F. Supp. 3d 1103, 1104 (N.D. Ill. 2015) ("[I]f there is no in personam jurisdiction the Court will be unable to reach the Rule 12(b)(6) matter.").

Subject Matter Jurisdiction

BACKGROUND

On March 19, 2019, the Government filed a complaint against Mr. Ho and Atria for violations of 19 U.S.C. § 1592. Complaint, ECF No. 2 ("Compl."). Mr. Ho was the owner and director of Atria, a California company that claims to have manufactured and distributed indoor and warehouse lighting products. Compl. ¶¶ 3-4. In March 2014, defendants Atria and Mr. Ho are alleged to have "attempted to enter, or attempted to cause to be entered, into the United States" HID headlight conversion kits falsely described as ballasts for interior track lighting fixtures. Id. ¶¶ 5-9. HID kits are prohibited from importation into the United States because they violate U.S. Department of Transportation safety laws. Id. ¶ 5. Atria and Mr. Ho are alleged to have "submitted, or caused to be submitted, to Customs documents which falsely described the HID headlight conversion kits as ballasts for interior track lighting fixtures." Id. ¶ 10.

In June 2018, United States Customs and Border Protection ("Customs") issued pre-penalty notices to Atria and Mr. Ho. Id. ¶ 12. Two weeks later, Customs issued a penalty notice to both Mr. Ho and Atria at "all addresses known to be associated with [Mr. Ho]" — in Fremont, California and Milpitas, California — and to Atria's corporate address in Irvine, California. Id. ¶¶ 14, 15. One of the three penalty notices was returned undelivered. ECF No. 7, Ex. 1 ¶ 7, 8. While Mr. Ho acknowledges receipt of the pre-penalty notice at the Fremont, California address, Compl. ¶ 15, Mr. Ho claims to have "never received any penalty notice from U.S. Customs and Border Protection in this matter," ECF No. 4, Ex. 3 ¶ 4, including at the Fremont, California address.

STANDARD OF REVIEW

Adjudication of a case before the court is not proper unless the court has subject matter jurisdiction over the claims presented. See Steel Co. v. Citizens for a Better Env't , 523 U.S. 83, 94-95, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998). Like all federal courts, this Court is one of limited jurisdiction. It is thus "presumed to be ‘without jurisdiction’ unless ‘the contrary appears affirmatively from the record.’ " DaimlerChrysler Corp. v. United States , 442 F.3d 1313, 1318 (Fed. Cir. 2006) (quoting King Iron Bridge & Mfg. Co. v. Otoe Cty. , 120 U.S. 225, 226, 7 S.Ct. 552, 30 L.Ed. 623 (1887) ). "[W]hen a federal court concludes that it lacks subject-matter jurisdiction, the complaint must be dismissed in its entirety." Arbaugh v. Y & H Corp. , 546 U.S. 500, 514, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006) ; see Atanasio v. O'Neill , 235 F. Supp. 3d 422, 424 (E.D.N.Y. 2017) (quoting 5B Wright & Miller, Fed. Prac. & Proc. Civ. § 1353 (3d. ed.) ) ("A federal court's entertaining a case that is not within its subject matter jurisdiction is no mere technical violation ..."). The party invoking jurisdiction must "allege sufficient facts to establish the court's jurisdiction," Milecrest Corp. v. United States , 41 CIT ––––, ––––, 264 F. Supp. 3d 1353, 1362 (2017) (citations omitted), and, therefore, "bears the burden of establishing it." Norsk Hydro Can., Inc. v. United States , 472 F.3d 1347, 1355 (Fed. Cir. 2006) (citations omitted). When deciding a motion to dismiss for lack of subject matter jurisdiction, "[t]he court must draw all reasonable inferences in favor of the non-movant. Milecrest Corp. , 264 F. Supp. 3d at 1362.

LEGAL FRAMEWORK

This Court has exclusive jurisdiction over actions by the United States to recover penalties imposed for a violation of 19 U.S.C. § 1592. 28 U.S.C. § 1582(1). The Court, "where appropriate, shall require the exhaustion of administrative remedies." Id. § 2637(d). Under the doctrine of exhaustion of administrative remedies, "no one is entitled to judicial relief for a supposed or threatened injury until the prescribed administrative remedy has been exhausted." United States v. Int'l Trading Servs., LLC , 40 CIT ––––, ––––, 190 F. Supp. 3d 1263, 1269 (2016).

This Court has found that to exhaust its administrative remedies, Customs "must perfect its penalty claim in the administrative process ... by issuing a pre-penalty notice and a notice of penalty." Int'l Trading Servs., LLC , 190 F. Supp. 3d at 1269. The pre-penalty notice must include certain information. 19 U.S.C. § 1592(b). Upon finding a violation, Customs also "shall issue a written penalty claim." Id. § 1592(b)(1). The penalty claim "shall specify all changes in the information" provided in the pre-penalty notice and provide a "reasonable opportunity ... to make representations, both oral and written." Id.

However, "[i]t is [ ] well established that § 2637(d) grants the court the discretion to waive § 1592(b) exhaustion in appropriate circumstances." United States v. Nitek Elecs., Inc. , 36 C.I.T. 546, 549, 844 F. Supp. 2d 1298, 1303 (2012). The exhaustion of administrative remedies is not "strictly speaking a jurisdictional requirement." United States v. Rotek, Inc. , 22 C.I.T. 503, 508 (1998) (citations omitted). Thus, "the court must focus not on a rigid application of the agency's regulations, but rather, on whether the defendant was afforded sufficient opportunity to be heard so as to justify the court's retention of jurisdiction without further exhaustion of the administrative remedies." Id.

DISCUSSION

I. Positions of the Parties

Defendant moves to dismiss for lack of subject matter jurisdiction on the basis that plaintiff failed to exhaust its administrative remedies. Def. Mot. Dis. at 1. Mr. Ho claims that while the Government alleges to have issued a notice of penalty on June 21, 2018, Compl. ¶ 14, Mr. Ho claims to have never in fact received the notice. ECF No. 4, Ex. 3 ¶ 4.

The purpose of "issu[ing] a written penalty claim" is both to "specify all changes in the information" provided in the pre-penalty notice as well as to provide "a reasonable opportunity ... to make representations, both oral and written." 19 U.S.C. § 1592(b)(2). It is on that basis that Mr. Ho argues that "he did not have a reasonable opportunity to be heard so as to justify the Court's retention of jurisdiction in this case." Def. Mot. Dis. at 10. Customs "must perfect its penalty claim in the administrative process ... by issuing a pre-penalty notice and a notice of penalty," Mr. Ho argues to the court. Defendant's Reply to Plaintiff's Opposition to Defendant's Motion to Dismiss, ECF No. 8 ("Def. Rep.") at 9 (citing Int'l Trading Servs., LLC , 190 F. Supp. 3d at 1269 ). Defendant submits that proximity to the expiration of the statute of limitations rendered the circumstance "exceptional" such as to require the use of certified mail and/or Federal Express appropriate. Def. Rep. at 9. "Because Customs was behind its own deadline ... such a circumstance would be considered ‘exceptional.’ " Id.

The Government argues that subject matter jurisdiction is proper on the basis that CBP exhausted its administrative remedies as required under 19 U.S.C. § 1592(b)(2). Pl. Opp. Mot. at 5-8. The Government argues that administrative remedies were exhausted because Customs issued a penalty...