United States v. Maverick Mktg., LLC, Slip Op. 18–16

• Decision Date: 07 March 2018
• Docket Number: Court No. 17–00174,Slip Op. 18–16
• Citation: 295 F.Supp.3d 1349
• Parties: UNITED STATES, Plaintiff, v. MAVERICK MARKETING, LLC et al., Defendants.
• Court: U.S. Court of International Trade

295 F.Supp.3d 1349

UNITED STATES, Plaintiff,

v.MAVERICK MARKETING, LLC et al., Defendants.

Slip Op. 18–16

Court No. 17–00174

United States Court of International Trade.

March 7, 2018

Stephen Carl Tosini, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, for plaintiff United States. With him on the brief were Chad A. Readler, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Claudia Burke, Assistant Director.

Barry Marc Boren, Law Offices of Barry Boren, of Miami, FL, and Gerson M. Joseph, Gerson M. Joseph, P.A., of Weston, FL, for defendants Maverick Marketing, LLC and Good Times USA, LLC.

Thomas Randolph Ferguson, Sandler, Travis & Rosenberg, PA, of San Francisco, CA, for defendant American Alternative Insurance Company.

OPINION AND ORDER

Kelly, Judge:

This matter is before the court on Maverick Marketing, LLC's ("Maverick") and Good Times USA, LLC's ("Good Times") motions to dismiss Plaintiff's complaint pursuant to USCIT Rule 12(b)(6) for failure to state a claim upon which relief can be granted. See Def., Maverick Marketing, LLC's Rule 12(b)(6) Mot. Dismiss & Mem. Law 1–3, Nov. 13, 2017, ECF No. 29 ("Maverick Mot. Dismiss"); Def., Good Times USA, LLC's Rule 12(b)(6) Mot. Dismiss & Mem. Law 1–3, Nov. 13, 2017, ECF No. 30 ("Good Times Mot. Dismiss"). Plaintiff, the United States ("Plaintiff"), on behalf of United States Customs and Border Protection ("CBP" or "Customs"), seeks to recover unpaid Federal Excise Tax ("FET"), in various amounts, and prejudgment interest from Defendants, Maverick, Good Times, and American Alternative Insurance Company ("AAIC") (collectively, "Defendants"), pursuant to section 592 of the Tariff Act of 1930, as amended 19 U.S.C. § 1592 (2012).¹ See Summons, July 10, 2017, ECF No. 1; Compl. at ¶¶ 1, 26–27, 32–33, July 10, 2017, ECF No. 2. From AAIC, Plaintiff also seeks mandatory statutory interest pursuant to 19 U.S.C. § 580. Compl. at ¶ 31. Plaintiff is also seeking attorney fees and any further interest, as provided by law, that the court deems just and appropriate. Id. at 6. For the reasons that follow, Maverick and Good Times' motions to dismiss are denied.

BACKGROUND

Maverick and Good Times move to dismiss on the grounds that Plaintiff's complaint merely recites the elements of a cause of action and alleges no "factual enhancement sufficient to withstand dismissal." Maverick Mot. Dismiss at 2; Good Times Mot. Dismiss at 2; see also Defs., [Maverick] & [Good Times]'s Reply to Pl.'s Resp. to Defs.' Mots. Dismiss & Mem. Law at 5–7, 12–19, Jan. 29, 2018, ECF No. 39 ("Joint Reply"). Maverick and Good Times also argue that Plaintiff fails to plead with particularity a claim of fraud or mistake, Maverick Mot. Dismiss at 4–5, 7–8; Good Times Mot. Dismiss at 4–5, 8; Joint Reply at 4, and improperly attempts to amend its complaint by adding a previously unpled basis for liability. See Joint Reply at 7–12. Further, Good Times argues that Plaintiff fails to plead sufficient facts demonstrating that Good Times had the requisite control over the customs entry process of the subject merchandise, or even participated in the process at all. See Good Times Mot. Dismiss at 9–14. Plaintiff responds that its complaint has sufficiently alleged that Maverick and Good Times made material false statements and/or omissions when entering the subject merchandise into United States commerce.² See Pl.'s Resp. Defs.' Mot. Dismiss at 7–15, Dec. 18, 2017, ECF No. 36 ("Pl.'s Resp."). Further, Plaintiff contends that the false statements and/or omissions came as a result of a scheme between Maverick and Good Times to underpay the FET on the subject merchandise.³ See id. at 1–2, 7–15. As a result, Plaintiff alleges that Maverick and Good Times violated 19 U.S.C. § 1592(a) and are liable for unpaid taxes under 19 U.S.C. § 1592(d).⁴ See id.

JURISDICTION AND STANDARD OF REVIEW

This Court possesses exclusive jurisdiction over claims brought under 19 U.S.C. § 1592 pursuant to 28 U.S.C. § 1582(1) (2012).

In deciding a motion to dismiss for failure to state a claim upon which relief can be granted, the court assumes all factual allegations in the complaint to be true and draws all reasonable inferences in favor of the plaintiff.

Cedars–Sinai Med. Ctr. v. Watkins, 11 F.3d 1573, 1584 n.13 (Fed. Cir. 1993) ; Gould, Inc. v. United States, 935 F.2d 1271, 1274 (Fed. Cir. 1991). However, the "[f]actual allegations must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact)[.]" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (citations and footnote omitted). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, [will] not suffice." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citation omitted). "[O]nly a complaint that states a plausible claim for relief survives a motion to dismiss." Iqbal, 556 U.S. at 679, 129 S.Ct. 1937 (citation omitted).

DISCUSSION

Plaintiff claims that Maverick and Good Times are liable for $3,339,011.08 worth of unpaid FET pursuant to 19 U.S.C. § 1592(d), stemming from the companies' violations of 19 U.S.C. § 1592(a).⁵ Compl. at ¶ 27; see also 19 U.S.C. § 1592(a), (d). For the reasons that follow, the court denies Maverick and Good Times' motions to dismiss.

The United States may recover an unpaid tax under 19 U.S.C. § 1592(d) for violations of 19 U.S.C. § 1592(a). See 19 U.S.C. § 1592(a), (d). To allege a violation under 19 U.S.C. § 1592(a), Plaintiff must plead sufficient facts to show that a person entered or introduced, or attempted to enter or introduce, merchandise into United States commerce by means of either (i) a material and false statement, document or act, or (ii) a material omission. 19 U.S.C. § 1592(a)(1)(A)(i)–(ii). Persons who are not the importer of record may be held liable under 19 U.S.C. § 1592(a) if they introduce or attempt to introduce merchandise into United States commerce. United States v. Trek Leather, Inc., 767 F.3d 1288, 1296–1299 (Fed. Cir. 2014) ; see also 19 U.S.C. § 1592(a). Merchandise is "introduced" into United States commerce when a person takes "actions that bring goods to the threshold of the process of entry by moving goods into CBP custody in the United States and providing critical documents" to the relevant officials. Trek Leather, 767 F.3d at 1299. A statement, document, or act is "material" if it has the "tendency to influence [Customs'] decision in assessing duties." United States v. Thorson Chemical Corp., 16 CIT 441, 448, 795 F.Supp. 1190, 1196 (1992) (citations omitted). The allegations cannot merely recite the elements of the claim under 19 U.S.C. § 1592(a), but must demonstrate an entitlement to relief "above the speculative level[.]" Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (citation omitted). Pursuant to the statutory framework, the FET on the subject merchandise at issue here is calculated based on the "price for which [the subject merchandise] sold[.]"

26 U.S.C. § 5701(a)(2) (2012).⁶ However, when there is no arm's-length transaction between the importer and domestic producer, the price on which the FET is calculated will be based "on the price for which such articles are sold, in the ordinary course of trade, by manufacturers or producers thereof, as determined by the Secretary [of the Treasury]." See 26 U.S.C. § 4216(b)(1)(C). A sale is not arm's length if it is "made pursuant to special arrangements between a manufacturer and a purchaser." 26 C.F.R. § 48.4216(b)–2(e)(2) (2012).⁷

Plaintiff alleges that the contract between Maverick and Good Times allowed Maverick to act as a "pass-through" entity, while Good Times financed all the transactions underlying the importation of the subject merchandise. Compl. at ¶¶ 15–19; see also Compl. at Agreement to [I]mport Tobacco Products, July 10, 2017, ECF No. 2–2 (referred to as "Exhibit B" in Plaintiff's complaint) ("Agreement"). Plaintiff alleges that the Agreement allowed Maverick and Good Times to calculate the FET based on a "purported price," i.e., the sales price from Rolida Investments, Inc. ("Rolida"),⁸ the exporter of the subject merchandise, to Maverick, plus one dollar per carton. Compl. at ¶ 15. Plaintiff alleges that, as a result, the sales price was not based on the first sale of the subject merchandise domestically at an arm's-length transaction, see id. at ¶¶ 15–19, but instead was the result of a "special arrangement" or scheme between Maverick and Good Times. Id. at ¶ 21; see also 26 U.S.C. § 4216(b)(1)(C) ; 26 C.F.R. § 48.4216(b)–2(e)(2). Plaintiff alleges that the Agreement, its terms, and the resulting "special arrangement" between Maverick and Good Times was not disclosed when the subject merchandise was entered, and claims that these failed disclosures constitute "false statements and/or omissions[.]"⁹ Compl. at ¶ 21. Plaintiff further alleges that the "false statements and/or omissions identified in [its complaint at ¶¶ 12–22] were material because they had the potential to affect determinations made by CBP concerning [Maverick and Good Times'] liability for FET." Id. at ¶ 23.

Plaintiff has alleged sufficient facts from which a trier of fact could conclude that the purported sales price of the subject merchandise upon which the FET was calculated was not the result of an arm's-length transaction.¹⁰ As support, Plaintiff provides a copy of the Agreement between Maverick and Good Times, see Agreement, and a summary of the payment structure underlying the importation of the subject merchandise into the United States. Compl. at ¶¶ 15–19. Plaintiff alleges that even though, as per the Agreement, Maverick paid Rolida and, in turn, Maverick would sell the merchandise to Good Times, at all relevant times Good Times controlled the transactions. Id. Plaintiff provides several examples of Good...