United States v. Ho
| Decision Date | 12 July 2022 |
| Docket Number | Slip Op. 22-81,Court No. 19-00038 |
| Citation | 582 F.Supp.3d 1325 |
| Parties | UNITED STATES, Plaintiff, v. Chu-Chiang "Kevin" HO, and Atria Corporation, Defendants. |
| Court | U.S. Court of International Trade |
William 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. Of counsel on the brief was Brian P. Beddingfield, Staff Attorney, Office of the Assistant Chief Counsel, U.S. Customs and Border Protection, of San Francisco, CA.
Elon A. Pollack and Kayla R. Owens, Stein Shostak Shostak Pollack & O'Hara, LLP, of Los Angeles, CA, for defendant Chu-Chiang "Kevin" Ho.
Before the court is a motion by defendant Chu-Chiang "Kevin" Ho ("Mr. Ho" or "defendant") to dismiss the complaint filed by the United States ("plaintiff" or the "Government") pursuant to section 592(a)(1)(A) and (B) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1592(a)(1)(A) and (B) (2012),1 for lack of personal jurisdiction and failure to state a claim upon which relief can be granted pursuant to United States Court of International Trade ("USCIT") Rules 12(b)(2) and 12(b)(6), respectively. See Def. Chu-Chiang "Kevin" Ho's Mot. to Dismiss Pursuant to USCIT Rules 12(b)(1), 12(b)(2), 12(b)(5), and 12(b)(6) ("Def. Mot. Dismiss"), ECF No. 4. Mr. Ho argues that the complaint does not plead fraud with particularity and does not allege facts such that Mr. Ho is personally liable. Id. Plaintiff opposes the motion to dismiss. See Pl.’s Opp'n to Def.’s Mot. to Dismiss ("Pl. Opp'n"), ECF No. 7.
For the following reasons, the court denies defendant's motion to dismiss for lack of personal jurisdiction and denies in part and grants in part defendant's motion to dismiss for failure to state a claim, with leave for plaintiff to amend its complaint.
On March 19, 2019, plaintiff filed a complaint against Mr. Ho and Atria Corporation ("defendants"). See Compl., ECF No. 2. The complaint alleges that defendants are jointly and severally liable for penalties for attempting to enter, or cause to be entered, merchandise by fraud, or in the alternative by gross negligence or negligence, in violation of 19 U.S.C. § 1592(a)(1)(A) and (B). Id. ¶¶ 17-25; id. at 5. The complaint asserts that Mr. Ho was the owner and director of Atria Corporation, an alleged manufacturing and distribution company for indoor and warehouse lighting. Id. ¶¶ 3-4. The complaint describes high-intensity discharge ("HID") headlight conversion kits and explains the reasons that their importation is prohibited. Id. ¶ 5 (citing 49 C.F.R. § 571.108 ). The complaint alleges:
On March 20, 2014, ATRIA and HO attempted to enter, or attempted to cause to be entered, into the United States one entry of HID headlight conversion kits through the Area Port of San Francisco identified by entry number D53-141064604-0l, with the intention that this merchandise be entered into United States commerce.
Id. ¶ 6. The complaint alleges further that both defendants declared, or caused to be declared, the HID headlight conversion kits as classifiable under Harmonized Tariff Schedule of the United States ("HTSUS")2 subheading 8504.40.9570 (inverters), "knowing that this declaration was not true." Id. ¶ 7. The complaint repeats these allegations for a second entry of HID headlight conversion kits on March 29, 2014, under entry number D53-1410799-01. Id. ¶¶ 8-9. U.S. Customs and Border Protection ("Customs") issued pre-penalty and penalty notices to defendants in June 2018 for both entries based on fraud and gross negligence and negligence in the alternative; the complaint alleges that neither defendant responded to the notices. Id. ¶¶ 12-16.
In addition, the complaint asserts that both defendants "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. Moreover, the complaint alleges that these statements "were intended to affect determinations made by [Customs] concerning the admissibility of the merchandise into United States commerce." Id. ¶ 11.
On April 29, 2019, Mr. Ho filed a motion to dismiss under USCIT Rules 12(b)(1), 12(b)(2), 12(b)(5) and 12(b)(6). Def. Mot. Dismiss at 1. On May 15, 2020, this court denied Mr. Ho's motion to dismiss for lack of subject matter jurisdiction under USCIT Rule 12(b)(1) but did not rule on the motion to dismiss for lack of personal jurisdiction under USCIT Rule 12(b)(2), the motion to dismiss for insufficient service of process under USCIT Rule 12(b)(5) or the motion to dismiss for failure to state a claim under USCIT Rule 12(b)(6). United States v. Ho , 44 CIT ––––, ––––, 452 F. Supp. 3d 1371, 1375-76 (2020). On September 14, 2021, this court denied Mr. Ho's motion to dismiss under USCIT Rule 12(b)(5), granted plaintiff's motion to extend the time of service and denied Mr. Ho's motion to quash service. Order (Sept. 14, 2021) ("Order"), ECF No. 37. Consequently, the two outstanding motions to dismiss are under USCIT Rules 12(b)(2) and 12(b)(6). See Def. Mot. Dismiss at 1.
Mr. Ho argues that the court lacks personal jurisdiction over him under USCIT Rule 12(b)(2) due to insufficient service of process. See Def. Mot. Dismiss at 3-4. In addition, Mr. Ho argues that the complaint fails to state a claim under USCIT Rule 12(b)(6) because plaintiff does not plead fraud with particularity against Mr. Ho in accordance with USCIT Rule 9(b) and does not allege facts that would make Mr. Ho personally liable. See id. at 6-8. Mr. Ho argues that the complaint contains only "a recitation of the elements of the cause of action and conclusory statements about intent." Id. at 6. Mr. Ho asserts that the complaint lacks allegations and supporting facts that he either "had any personal involvement with the preparation or filing of the two entries and related documents" or that he "knowingly and intentionally prepared false documents, instructed the preparation of false documents, made any false declarations, or caused the entries to be filed." Id. at 7 (emphasis omitted). Moreover, Mr. Ho asserts that the complaint "does not provide any specific fact to support that Mr. Ho was involved personally in describing the merchandise, instructing anyone on how to describe the merchandise, or the submission of documents to [Customs]." Id. Mr. Ho argues that the complaint, unlike the complaint in United States v. Islip , 22 C.I.T. 852, 871, 18 F. Supp. 2d 1047, 1063-64 (1998), does not provide allegations sufficient to meet the pleading standard. Id. at 8.
In opposition to the motion to dismiss, plaintiff states: "The complaint specifies the date of the attempted entries, the parties involved, the area port location, the entry numbers, and the subject merchandise." Pl. Opp'n at 9 . Therefore, plaintiff states that fraud was pleaded with sufficient particularity.
Id. Plaintiff asserts further that additional details are not required to allege personal liability and that Mr. Ho's liability is not "based upon his role as ATRIA's director." Id. at 10 (citing Def. Mot. Dismiss at 6-8 (citing United States v. Trek Leather , 767 F.3d 1288, 1299 (Fed. Cir. 2014) ) (comparing this allegation of liability to the holding of Trek Leather , in which liability was based on an individual's own acts in introducing men's suits into U.S. commerce under agency law and not on his status as an officer or owner of a corporation).3
On July 27, 2021, the parties submitted a joint status report stating: "If this case is not dismissed, the parties will file a stipulation for partial judgment solely on the issue of Defendant CHU-CHIANG ‘KEVIN’ HO's liability within 21 days from the date of the Court's decision." Joint Status Report at 1, ECF No. 32.
On July 27, 2021, plaintiff emailed the summons and complaint to Mr. Ho's counsel. The United States’ Notice of Error and Mot. for Extension of Time of Service, ECF No. 34 at Ex. 3. Service was subsequently effected on July 27, 2021, pursuant to the court's order of September 14, 2021, which granted plaintiff's motion for an extension of time of service until and through July 27, 2021. See Order.
This court has jurisdiction pursuant to 28 U.S.C. § 1582(1) and reviews the case de novo under 28 U.S.C. § 2640(a)(6) and 19 U.S.C. § 1592(e)(1).
A complaint must have "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (citing Papasan v. Allain , 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986) ). Taken as true, "[f]actual allegations must be enough to raise a right to relief above the speculative level." Id. ; see United States v. Int'l Trading Services, LLC , 40 CIT ––––, ––––, 190 F. Supp. 3d 1263, 1268-69 (2016). A complaint must meet also the "plausibility standard" and include more than "mere conclusory statements." Ashcroft v. Iqbal , 556 U.S. 662, 678-79, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). "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. at 678, 129 S.Ct. 1937.
For fraud allegations, USCIT Rule 9(b) states: See United States v. Greenlight Organic, Inc. ("Greenlight II "), 44 CIT ––––, ––––, 466 F. Supp. 3d 1260, 1263 (2020) ; see also United States v. NYWL Enters. Inc. ("NYWL I "), 44 CIT ––––, ––––, 476 F. Supp. 3d 1394, 1399-1400(2020) ; United States v. NYWL Enters. Inc. ("NYWL II "), 45...
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