United States v. Greenlight Organic, Inc.

• Citation: 466 F.Supp.3d 1260
• Decision Date: 14 July 2020
• Docket Number: Slip Op. 20-100,Court No. 17-00031
• Parties: UNITED STATES, Plaintiff, v. GREENLIGHT ORGANIC, INC., and Parambir Singh "Sonny" Aulakh, Defendants.
• Court: U.S. Court of International Trade

466 F.Supp.3d 1260

UNITED STATES, Plaintiff,

v.GREENLIGHT ORGANIC, INC., and Parambir Singh "Sonny" Aulakh, Defendants.

Slip Op. 20-100

Court No. 17-00031

United States Court of International Trade.

July 14, 2020

William Kanellis and Kelly Krystyniak, Trial Attorneys, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, D.C., for Plaintiff United States. With them on the brief were Joseph H. Hunt, Assistant Attorney General, Jeanne E. Davidson, Director, and Patricia M. McCarthy, Assistant Director.

Angela M. Santos, Robert B. Silverman, and Joseph M. Spraragen, Grunfeld Desiderio Lebowitz Silverman & Klestadt LLP, of New York, N.Y., for Defendant Parambir Singh Aulakh.¹

Choe-Groves, Judge:

Plaintiff United States ("Plaintiff" or "Government") brings this 19 U.S.C. § 1592 civil enforcement action seeking to recover unpaid duties and to affix penalties, alleging that Greenlight Organic, Inc. ("Greenlight") and Parambir Singh "Sonny" Aulakh ("Aulakh" or "Defendant Aulakh") (together, "Defendants") imported wearing apparel into the United States fraudulently. Second Am. Compl. ¶ 1, ECF No. 124. Pending before the court is Defendant Aulakh's Motion to Dismiss Plaintiff's Second Amended Complaint under USCIT Rule 12(b)(6). Def.’s Mot. to Dismiss & Mem. of Law in Supp. of Mot. to Dismiss ("Def. Br."), ECF No. 128. Plaintiff opposed Aulakh's motion. Pl.’s Opp'n to Def.’s Mot. to Dismiss ("Pl. Opp'n"), ECF No. 129. Aulakh replied. Reply Mem. in Supp. of Def.’s Mot. to Dismiss Second Am. Compl. ("Def. Reply"), ECF No. 130.² For the reasons set forth below, Aulakh's motion is denied.

I. BACKGROUND

The court presumes familiarity with the facts set forth in its prior opinion dismissing the First Amended Complaint with leave to amend and now recounts those facts relevant to the court's review of the Motion to Dismiss the Second Amended Complaint. See United States v. Greenlight Organic, Inc., 43 CIT ––––, 419 F. Supp. 3d 1298, 1301–02 (2019) (" Greenlight II").

In Greenlight II, Aulakh moved to dismiss the First Amended Complaint for failure to exhaust administrative remedies and for failure to state a claim. Id. at 1303. This court held that Plaintiff's fraudulent importation claim was administratively exhausted and that Plaintiff failed to plead the fraud allegations with sufficient particularity under USCIT Rule 9(b). Id. at 1304–05. The court dismissed the First Amended Complaint and granted Plaintiff leave to cure the pleading deficiencies discussed in the opinion. Id. at 1306. Plaintiff then filed the Second Amended Complaint.

In the Second Amended Complaint, Plaintiff includes new facts to support its allegations, including that "Greenlight, under the direction of Aulakh ... knowingly made material false statements" as to the classification, valuation, and source fabrics of wearing apparel made "under cover of approximately 148 entries" of athletic wearing apparel into the United States. Second Am. Compl. ¶ 6. As to the misclassification scheme, Plaintiff provides new facts identifying Monika Gill ("Gill") and Apramjeet "A.J." Singh ("Singh") as employees and agents of Greenlight who knew that 122 entries of athletic wearing apparel were comprised of knitted materials that are subject to higher duties, based on their role in selecting and sourcing the fabrics used to produce the subject entries of wearing apparel. Id. ¶ 8. Plaintiff avers further that Defendants, as well as Gill and Singh, conspired with Van Le, the owner of manufacturer One Step Ahead, to make material and false statements about the composition of the athletic wearing apparel. Id. ¶ 9. As to the undervaluation allegations, Plaintiff provides new facts to support its allegation of a double-invoicing scheme. Id. ¶¶ 12–15. Plaintiff avers that "Aulakh directed Greenlight to create and submit to [U.S. Customs and Border Protection] alternate invoices for the same purchases of wearing apparel from One Step Ahead." Id. ¶ 14. Plaintiff alleges that Aulakh created a double-invoicing scheme, in which payments for the entered merchandise were deposited into two separate bank accounts: monetary amounts matching amounts claimed in documents submitted to U.S. Customs and Border Protection ("Customs") were deposited into the account of manufacturer One Step Ahead, and separate additional payments were deposited into the personal account of Van Le, the owner of One Step Ahead. Id. ¶ 15, Ex. 2 (listing the date and amount of payments relating to entries for which Aulakh and Greenlight created two invoices).

II. LEGAL STANDARD

"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. "The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id.

When pleading fraud, "the circumstances constituting fraud" must be stated "with particularity," but intent or knowledge may be alleged generally. USCIT R. 9(b) ; Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1326 (Fed. Cir. 2009). The plaintiff must inject factual precision or some measure of substantiation, i.e., pleading in detail "the who, what, when, where, and how of the alleged fraud." Exergen Corp., 575 F.3d at 1327 (citation omitted). Although intent and knowledge may be pled with generality, the pleading must contain "sufficient underlying facts from which a court may reasonably infer that a party acted with the requisite state of mind." Id.; see United States ex rel. Heath v. AT & T, Inc., 791 F.3d 112, 123–24 (D.C. Cir. 2015).

III. DISCUSSION

Aulakh moves to dismiss the Second Amended Complaint under USCIT Rule 12(b)(6) based on three theories. First, Aulakh argues that Plaintiff's claims have not been exhausted because Customs failed to provide proper notice to Defendants of the entries at issue when conducting the underlying administrative penalty proceeding and thus failed to perfect the penalty claim. Def. Br. at 17–24. Second, Aulakh asserts that the five-year statute of limitations bars Plaintiff's claims as to all entries identified in the Second Amended Complaint. Id. at 25–31. Third, Aulakh argues that the Second Amended Complaint fails to plead the allegations of fraud with sufficient particularity per USCIT Rule 9(b). Id. at 7–16.

A. Exhaustion of Administrative Remedies

Aulakh argues that Customs did not exhaust its administrative remedies because Customs never provided Defendants with an appraisement schedule and failed to provide Defendants with an opportunity to challenge the fraud allegations during the administrative proceedings. Id. at 17–24. Plaintiff counters that Aulakh's exhaustion argument "fails for the same reason it failed earlier: because it is predicated upon the false characterization that Aulakh was not supplied with the basis for [Customs’] penalty and loss-of-revenue calculation and was not provided an adequate administrative hearing." Pl. Opp'n at 19.

This court previously considered and rejected Defendant Aulakh's exhaustion argument, holding that Aulakh received notice that Customs intended to assert liability against him for penalties owed by Greenlight, and that Aulakh was given notice and a right to be heard throughout the underlying administrative proceedings. Greenlight II, 419 F. Supp. 3d at 1304. Defendant Aulakh presses the argument again here, based on his repeated claim that Defendants never received an adequate appraisement schedule of the subject merchandise from Customs. See Def. Br. at 23–24.

The court remains unconvinced. To perfect a penalty claim at the administrative level, Customs must issue pre-penalty and penalty notices containing certain information regarding the particulars of the fraud allegations. Greenlight II, 419 F. Supp. 3d at 1303. The court observes that the Second Amended Complaint contains sufficient facts to defeat the motion to dismiss based on a challenge to administrative exhaustion, because Plaintiff avers that Customs issued a pre-penalty notice of $3,232,032 pursuant to 19 U.S.C. § 1592 on or about April 15, 2014, alleging that Greenlight's violations were the result of fraud, and a subsequent penalty notice for $3,232,032 and duty demand for $217,968.22 pursuant to 19 U.S.C. § 1592 on or about May 16, 2014. Second Am. Compl. ¶¶ 23–28. These allegations are sufficient to state a claim for relief that is plausible on its face showing that Defendants received sufficient notice that Customs intended to assert liability and had the opportunity to be heard during the administrative proceedings, thus satisfying the administrative exhaustion requirement. The court denies, therefore, the motion to dismiss the Second Amended Complaint on the basis of administrative exhaustion.

B. Statute of Limitations

Aulakh argues that the five-year statute of limitations has expired, based on Aulakh's contention that Plaintiff appended new exhibits documenting the entries at issue for the first time in the Second Amended Complaint and thus Plaintiff failed to identify the entries and claim details when Plaintiff filed the original Complaint in February 2017. Def. Br. at 25–27; Compl., ECF No. 2. Plaintiff responds that the Government discovered Defendants’ fraudulent scheme in February 2012, when Aulakh first produced to Customs records from Greenlight showing evidence of a double-invoicing scheme. Pl. Opp'n at 22. Plaintiff also notes that Defendants received the same list of entries at issue during the pre-penalty and penalty stage of the underlying...