United States v. Nitek Elecs., Inc., Slip Op. 12-105

• Decision Date: 07 August 2012
• Docket Number: Slip Op. 12-105,Court No. 11-00078
• Parties: UNITED STATES, Plaintiff, v. NITEK ELECTRONICS, INC., Defendant.
• Court: U.S. Court of International Trade

UNITED STATES, Plaintiff, v. NITEK ELECTRONICS, INC., Defendant.

Slip Op. 12-105 Court No. 11-00078

UNITED STATES COURT OF INTERNATIONAL TRADE

August 7, 2012

Before: Judith M. Barzilay, Senior Judge

[Motion for reconsideration denied.]

Stuart F. Delery, Acting Assistant Attorney General; Jeanne E. Davidson, Director; Patricia M. McCarthy, Assistant Director; Delisa M. Sanchez, Commercial Litigation Branch, Civil Division, U.S. Department of Justice; and Eric P. Delmar, U.S. Customs and Border Protection, Of Counsel, for Plaintiff United States.

Baker & McKenzie, LLP (William D. Outman, II, Michael E. Murphy, Kevin J. Sullivan) for Defendant Nitek Electronics, Inc.

MEMORANDUM & ORDER

BARZILAY, Senior Judge:

Plaintiff United States ("Plaintiff") moves under USCIT Rule 59 for reconsideration of the court's opinion dismissing in part its action to recover penalties and lost duties on entries of gas meter swivels and gas meter nuts from the People's Republic of China. See United States v. Nitek Elecs., Inc., 36 CIT _, 844 F. Supp. 2d 1298 (2012) ("Nitek I").¹ Specifically, Plaintiff argues that the court erred in dismissing its penalty claim for negligence for failure to exhaust the administrative remedies enumerated in 19 U.S.C. § 1592. For the reasons below, the court denies Plaintiff's motion.

I. Standard of Review

Granting a motion for reconsideration pursuant to USCIT Rule 59 rests within the sound discretion of the court. Target Stores, Div. of Target Corp. v. United States, 31 CIT 154, 156, 471 F. Supp. 2d 1344, 1346-47 (2007). "The major grounds justifying reconsideration are an intervening change of controlling law, the availability of new evidence, or the need to correct a clear error or prevent manifest injustice." E.g., Royal Thai Gov't v. United States, 30 CIT 1072, 1074, 441 F. Supp. 2d 1350, 1354 (2006) (citation omitted). A motion for reconsideration serves as "a mechanism to correct a significant flaw in the original judgment . . . ." United States v. UPS Customhouse Brokerage, Inc., 34 CIT _, __, 714 F. Supp. 2d 1296, 1301 (2010) (citation omitted). It does not, however, afford a losing party an opportunity "to repeat arguments or to relitigate issues previously before the court." Id. "Importantly, the court will not disturb its prior decision unless it is 'manifestly erroneous.'" Starkey Labs., Inc. v. United States, 24 CIT 504, 505, 110 F. Supp. 2d 945, 947 (2000) (citation omitted).

II. Discussion

Plaintiff bases its motion primarily on the grounds of clear error. Plaintiff begins by noting that § 1592(e)(1) subjects penalty actions brought under that section to de novo review. Pl.'s Mot. 4-8. From this, Plaintiff concludes that

this Court does not review whether [Customs] complied with its statutory or regulatory requirements during the administrative proceedings. Again, whether [Customs] complied with its statutory or regulatory obligations is immaterial, so long as this Court possesses jurisdiction to review the claims de novo, which it does here.

Pl.'s Mot. 12. Therefore, according to Plaintiff, the court was not empowered to dismiss its penalty claim for negligence on exhaustion grounds. Pl.'s Mot. 8.

Plaintiff raised this same argument in its response to Nitek's motion to dismiss. In requesting reconsideration, Plaintiff elaborates upon its belief that § 1592(e) renders the Courtpowerless to review Customs' obligation to state in the pre-penalty notice and penalty claim "whether the alleged violation occurred as a result of fraud, gross negligence, or negligence." See § 1592(b)(1)(A)(v); § 1592(b)(2). The court, however, sees nothing of substance in this argument that was not already addressed in Nitek I. A party's disagreement with a ruling does not always equate to "clear error" warranting reconsideration. More to the point, mere repetition of unsuccessful arguments is an improper use of Rule 59 and a needless delay to finality. The court cannot grant Plaintiff's motion on this basis.

In a sense, Plaintiff's position reflects an understandably confounding dichotomy in the Court's role in § 1592 actions. On the one hand, as Plaintiff notes, the statute directs that "all issues, including the amount of the penalty, shall be tried de novo." § 1592(e)(1). This provision allows the Court to decide the appropriate remedy² without being tethered to the claim imposed below, see S. Rep. No. 95-778, at 20 (1978), and indicates the lack of deference the Court affords Customs' penalty determinations, see United States v. Optrex Am., Inc., 29 CIT 1494, 1499 (2005) (not reported in F. Supp.). De novo review must, however, be viewed in context. As discussed in Nitek I, § 1592 creates a cause of action for the government not to impose a penalty claim but to recover a penalty already imposed at the administrative level. See § 1592(e); see also 28 U.S.C. § 1582(1). In other words, for the Court to have any role, there must exist a claim for a specified violation of § 1592(a) - namely, a material false statement oromission amounting to "fraud, gross negligence, or negligence" - for which the government is seeking recovery, thereby limiting the scope of the government's § 1592 action to the administrative claim Customs imposed below. The precise penalty claim Customs imposed for one of these three levels of culpability is thus central to the Court's review, de novo though it may be. See United States v. Ford Motor Co., 463 F.3d 1286, 1298 (Fed. Cir. 2006) ("[T]he Court of International Trade in Optrex effectively limited the de novo review provided for in § 1592(e) to those issues considered in the proceedings before Customs. Although we are not bound by the Court of International Trade's decision in Optrex, we conclude that it correctly defines the proper scope of § 1592(e)."). Therefore, Plaintiff's argument does not demonstrate manifest error in the court's ruling.

Plaintiff doubles down on its argument, however, by stating that "we are aware of no legal authority that imposes an exhaustion requirement upon the Government in a de novo proceeding where, as here, the jurisdictional prerequisites are satisfied." Pl.'s Mot. 6. This claim does not withstand scrutiny. Section 2637(d) clearly prescribes that, "[i]n any civil action not specified in [§ 2637(a)-(c)], the Court of International Trade shall, where appropriate, require the exhaustion of administrative remedies." 28 U.S.C. § 2637(d) (emphasis added). The Federal Circuit has clarified that "[t]here is no doubt that the doctrine of exhaustion of administrative remedies applies to an agency seeking enforcement of administrative action prior to the completion of the administrative process," but that "[e]xhaustion of administrative remedies is not strictly speaking a jurisdictional requirement . . . ." United States v. Priority Prods., Inc., 793 F.2d 296, 300 (Fed. Cir. 1986) (citation omitted). Additionally, this Court has long applied this (non-jurisdictional³) exhaustion requirement to penalty actions. See, e.g., United States v. UPSCustomhouse Brokerage, Inc., 34 CIT __, __, 686 F. Supp. 2d 1337, 1346 (2010) ("To demonstrate that a penalty has been properly imposed under § 1641(d)(2)(A), Plaintiff must establish both that the broker committed a violation of Customs law as the predicate for the penalty, and that all formal requirements of the procedure for imposing the penalty were properly followed by Customs." (footnote omitted)); United States v. Jean Roberts of Cal., Inc., 30 CIT 2027, 2030 (2006) (not reported in F. Supp.) ("Before seeking to recover a penalty in the Court of International Trade, Customs must perfect its penalty claim in the administrative process required by Section 592 . . . ."); United States v. Bavarian Motors, Inc., 4 CIT 83, 86 (1982) ("The administrative review by Customs of an importer's protest is obviously a condition precedent to his commencement of a judicial proceeding. This requirement is no less applicable to the Government. Although the situation . . . of an agency seeking enforcement of administrative action prior to completion of the administrative review process, is much less common, there is no reason for a different standard to prevail." (citations and internal quotation marks omitted)).⁴ As in all actions, Plaintiff is free to distinguish purportedly binding authority or to urge departure from persuasive precedent. But Plaintiff is simply incorrect in asserting lack of any controlling law on the issue of exhaustion in de novo proceedings.

Plaintiff argues that, in any case, Customs satisfied the statutory requirements by placing Nitek on notice of its penalty claim for negligence by imposing a claim for gross negligence - a level of culpability that (by definition, Plaintiff writes yet again) includes the elements necessary to establish negligence. Pl.'s Mot. 8-11. Plaintiff avers that Nitek was able to resolve the claim below as it must have been fully aware that Customs viewed it as culpable of negligence in addition to gross negligence. Pl.'s Mot. 11. Again, this argument was squarely presented to and rejected by the court in Nitek I and has no business arising in a motion for reconsideration. The court will not repeat its reasoning for rejecting this argument here. Suffice it to say that Plaintiff continues to cite no authority that demonstrates that the criminal doctrine of lesser-included culpability applies to the (vastly distinguishable) context of civil penalties imposed pursuant to § 1592. Indeed, Plaintiff has yet to identify a single case in which this Court entertained a § 1592 recovery action for a level of culpability that Customs did not impose below. In § 1592(b)(1)(A)(v) and § 1592(b)(2), Congress directed Customs to specify certain applicable level(s) of culpability and mandated that the Court "shall, where appropriate, require the exhaustion of administrative remedies." § 2637(d) (emphasis added). The court will not ignore this clear instruction.

Plaintiff next argues that even if the...