United States v. Katana Racing, Inc.
| Docket Number | 2022-1832 |
| Decision Date | 03 August 2023 |
| Citation | 75 F.4th 1346 |
| Parties | UNITED STATES, Plaintiff-Appellant v. KATANA RACING, INC., dba Wheel & Tire Distributors, Defendant-Appellee |
| Court | U.S. Court of Appeals — Federal Circuit |
Appeal from the United States Court of International Trade in No. 1:19-cv-00125-TJA, Senior Judge Thomas J. Aquilino, Jr.
Emma Eaton Bond, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for plaintiff-appellant. Also represented by Brian M. Boynton, Tara K. Hogan, Patricia M. Mccarthy.
Pratik A. Shah, Akin Gump Strauss Hauer & Feld LLP, Washington, DC, argued for defendant-appellee. Also represented by Patrick Klein, John M. Peterson, Neville Peterson LLP, New York, NY; Richard F. O'neill, Seattle, WA.
Before Prost, Schall, and Hughes, Circuit Judges.
On July 15, 2019, the United States brought an action in the United States Court of International Trade against Katana Racing, Inc. ("Katana"). In that action, the government sought to recover unpaid customs duties and fees pursuant to the Tariff Act of 1930, 19 U.S.C. § 1592(d). J.A. 89-94. Instead of answering the complaint, on August 30, 2019, Katana filed a motion to dismiss pursuant to United States Court of International Trade Rule ("CIT Rule") 12(b). Among other things, Katana asserted that the complaint should be dismissed pursuant to CIT Rule 12(b)(1) for lack of jurisdiction because the government had filed suit after the statute of limitations set forth at 19 U.S.C. § 1621 had run. Katana stated that, although it had signed a waiver of the statute of limitations on October 25, 2016, it had revoked the waiver prior to the expiration of the limitations period. J.A. 242-45. In a decision dated March 28, 2022, the Court of International Trade found that Katana had properly revoked its October 25, 2016 waiver of the statute of limitations. As a result, the court held that the government's suit was untimely, and it dismissed the suit pursuant to CIT Rule 12(b)(1) for lack of jurisdiction. United States v. Katana Racing, Inc., 569 F. Supp. 3d 1296, 1314 (Ct. Int'l Trade 2022).
The government now appeals. For the reasons set forth below, we hold that the Court of International Trade erred in dismissing the government's suit for lack of jurisdiction. We therefore reverse the court's decision and remand the case to the court for further proceedings.
The facts pertinent to this appeal are set forth in the government's complaint. See Bioparques de Occidente, S.A. de C.V. v. United States, 31 F.4th 1336, 1343 (Fed. Cir. 2022) .
Katana, a California-based distributor of high-end wheels and tires, was the importer of record for 386 entries of passenger vehicle and light truck tires from China between November 24, 2009, and August 7, 2012. J.A. 89-91. For those 386 entries, Katana supplied U.S. Customs and Border Protection ("Customs" or "CBP") with invoices that listed prices lower than what Katana actually paid its Chinese vendors. Id. at 91. Due to this error, Katana undercalculated the amount of safeguard duties, regular customs duties, harbor maintenance fees, and merchandise processing fees it owed Customs by $5,742,483.80. Id. On June 20, 2019, Customs issued a demand to Katana for the unpaid duties and fees. Id. at 93.
As noted, on July 15, 2019, the government filed suit against Katana for unpaid customs duties and fees "[b]ased on its violation of 19 U.S.C. § 1592(a) and under 19 U.S.C. § 1592(d)." Id. at 93-94. According to the government, "Katana did not exercise reasonable care to ensure that [the 386 entries at issue] . . . reflected accurate values of the merchandise, and thus Katana violated 19 U.S.C. § 1592(a)." Id. at 92.1
Although filed outside the statute of limitations time period set forth at 19 U.S.C. § 1621, the government's complaint stated that it was timely because Katana had executed three consecutive waivers of the statute of limitations. In the last of these waivers, dated October 25, 2016, Katana indicated that the statute of limitations would be waived for a period "up to and including July 15, 2019," the date the government filed suit. Id. at 90 (quoting J.A. 173).
As noted, on August 30, 2019, Katana moved to dismiss the government's action under CIT Rule 12(b). J.A. 204-05. Specifically, Katana's motion sought dismissal under CIT Rule 12(b)(6) for "failure to state a claim upon which relief can be granted" and CIT Rule 12(b)(1) for "lack of subject-matter jurisdiction." Id. at 204; CIT Rule 12(b). Katana's motion included a statement of facts supported by exhibits other than the pleadings. J.A. 213-21, 215 n.4, 252. In that statement of facts, Katana asserted that it "had been the victim of a pervasive scheme of identity theft, as Chinese vendors had engaged U.S. customs brokers to file entries in Katana's name, without Katana's knowledge or permission." Id. at 215.
Although it acknowledged that a CIT Rule 12(b)(6) motion turns on the facts as alleged in the complaint, id. at 222, Katana stated that, "[t]o the extent the parties rely on materials outside the pleadings," the Court of International Trade should treat Katana's motion as a motion for summary judgment under CIT Rule 12(d), id. at 215 n.4.2 In its motion, Katana also stated that the court could consider evidence outside the pleadings to establish the predicate facts when considering a CIT Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction. Id. at 221-22 (citing Cedars-Sinai Med. Ctr. v. Watkins, 11 F.3d 1573, 1583-84 (Fed. Cir. 1993)).
Katana made three main arguments in its motion to dismiss. First, it argued that the government's complaint should be dismissed under CIT Rule 12(b)(6) for failure to state a claim because Customs had never found a violation of 19 U.S.C. § 1592(a). According to Katana, such a finding was a prerequisite to the assessment of penalties under 19 U.S.C. § 1592(c) and the assertion of a claim for unpaid and owed duties under 19 U.S.C. § 1592(d). Id. at 222, 228, 232-37. Second, Katana argued that the complaint should be dismissed under CIT Rule 12(b)(6) because Customs was required to exhaust the administrative procedures set forth in 19 U.S.C. § 1592(b) before it could lawfully determine that a violation of § 1592(a) had occurred, which it failed to do. Id. at 237-42.3
Katana's third argument was that the government's suit was untimely and should be dismissed under CIT Rule 12(b)(1) because Katana had revoked its final waiver of the statute of limitations. Id. at 242-49. Katana asserted that it had agreed to three different waivers of the statute of limitations "[a]t CBP's request, and in order to obtain the benefit of orderly administrative proceedings regarding any violations which might be asserted." Id. at 243 (internal quotation marks omitted). Katana argued that it properly revoked the third waiver of the statute of limitations on June 26, 2019, because, contrary to representations that Customs had made to it, Customs never undertook the administrative proceedings contemplated by § 1592(b) to determine the validity of Katana's claim that it had been the victim of identity theft. Id. at 243-49.
Responding first to Katana's arguments for dismissal under CIT Rule 12(b)(6), the government argued that Customs need not have established a violation of § 1592(a) to bring suit. Instead, the government contended, it needed only to allege a violation of § 1592(a) in its complaint. J.A. 697. Next, the government urged that Customs need not have followed the administrative process outlined in § 1592(b) to establish such a violation of § 1592(a) prior to filing suit under § 1592(d). Id. at 693-97. In making this argument, the government cited this court's decisions in United States v. Blum, 858 F.2d 1566 (Fed. Cir. 1988), United States v. Inn Foods, Inc., 560 F.3d 1338 (Fed. Cir. 2009), and United States v. Jac Natori Co., 108 F.3d 295 (Fed. Cir. 1997), as well as the decisions of the Court of International Trade in United States v. Aegis Security Insurance Co., 301 F. Supp. 3d 1359 (Ct. Int'l Trade 2018), United States v. Nitek Electronics, Inc., 844 F. Supp. 2d 1298 (Ct. Int'l Trade 2012), aff'd on other grounds, 806 F.3d 1376 (Fed. Cir. 2015), United States v. Aegis Security Insurance Co., 398 F. Supp. 2d 1354 (Ct. Int'l Trade 2005), and United States v. Ross, 574 F. Supp. 1067 (Ct. Int'l Trade 1983). J.A. 694-98. According to the government, these cases stand for the proposition that § 1592(d) creates an independent cause of action for unpaid duties that does not require the exhaustion of § 1592(b)'s administrative remedies. Id.
The government also disputed Katana's contention that the suit was untimely. Katana's purported justification for revoking its third waiver of the statute of limitations was unavailing, the government asserted, because the government did not promise Katana administrative proceedings in exchange for the waiver. Id. at 701-02. In addition, the government argued that Katana should be estopped from revoking its waiver because Customs justifiably relied upon the waiver. Id. at 702-04.
On March 28, 2022, the Court of International Trade granted Katana's motion to dismiss, reasoning that the suit was "barred by the passage of time." Katana, 569 F. Supp. 3d at 1314. The court deemed Katana's June 26, 2019 revocation of its third waiver of the statute of limitations to be effective, accepting Katana's explanation that Customs did not undertake the administrative procedures it had "promised" Katana it would provide. Id. at 1305-06, 1308-10, 1312-14. That is, Customs "did not properly exhaust the administrative procedures that it had obliged itself to undertake," ...
To continue reading
Request your trial