United States v. Puentes

• Decision Date: 29 March 2017
• Docket Number: Slip Op. 17–33,Court No. 14–00310
• Parties: UNITED STATES, Plaintiff, v. Paul PUENTES, Defendant.
• Court: U.S. Court of International Trade

219 F.Supp.3d 1352

UNITED STATES, Plaintiff,

v.Paul PUENTES, Defendant.

Slip Op. 17–33

Court No. 14–00310

United States Court of International Trade.

March 29, 2017

Albert S. Iarossi , Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington D.C., for Plaintiff. With him on the brief were Benjamin C. Mizer , Principal Deputy Assistant Attorney General, Civil Division, and Jeanne E. Davidson , Director, and Franklin E. White, Jr. , Assistant Director, Commercial Litigation Branch.

OPINION

RIDGWAY, Judge:

Plaintiff, the United States, brings this action to recover a civil penalty imposed on Defendant Paul Puentes ("Puentes") by the Bureau of Customs and Border Protection ("Customs").¹ See generally Complaint; Plaintiff's Motion for Entry of Default Judgment ("Pl.'s Brief"). Now pending is Plaintiff's Motion for Entry of Default Judgment, which seeks judgment against Puentes in the amount of $30,000, as well as post-judgment interest and costs. Complaint at 6; Pl.'s Brief at 1, 9.²

Jurisdiction lies under 28 U.S.C. § 1582(1) (2006).³ For the reasons summarized below, Plaintiff's Motion for Entry of Default Judgment must be granted.

I. Background

At the time of the events giving rise to this action, Paul Puentes was a licensed customs broker. Complaint ¶ 3.⁴ At issue is a $30,000 penalty that Customs assessed against Puentes in early 2011, pursuant to 19 U.S.C. § 1641(d). See generally Complaint; see also Declaration of Delia Crawford passim (Attachment A to Pl.'s Brief) ("Crawford Declaration"); Pl.'s Brief at 3–4, 8–9. The two counts of the Government's Complaint address four types of misconduct, which the Government characterizes as "Merchandise Processing Fees Deception," "Late Entry Summaries," "Failure To File Entry Summaries," and "Misrepresentation Of The Importer of Record." See generally Pl.'s Brief at 1–3. As explained below, because Puentes failed to plead or otherwise respond to the Complaint, the factual allegations that follow, as set forth in the Complaint, must be taken as true. See generally infra section II.

Payment of Merchandise Processing Fees . First, between April 2008 and February 2009, Puentes filed Customs Forms 7501s ("CF 7501s")—also known as "entry summaries"—for 88 entries of merchandise on behalf of his client Florexpo, LLC ("Florexpo"). Complaint ¶ 4.⁵ However, as to 79 of the 88 entries, Puentes collected merchandise processing fees from Florexpo in an amount that exceeded the sum that he ultimately remitted to Customs on the company's behalf. Id. ¶¶ 5–7.⁶

Specifically, for the 79 entries in question, the CF 7501s that Puentes sent to Florexpo reflected the true value of the imported merchandise and correctly calculated the amount that the company owed to Customs for merchandise processing fees. Complaint ¶ 5. But, after receiving payment from Florexpo in the full and correct amount due, Puentes submitted different CF 7501s to Customs—i.e. , CF 7501s that reflected lower declared values and correspondingly lower merchandise processing fees. Id. ¶¶ 5–7. As a result of these actions, Puentes collected from Florexpo approximately $6437.05 more in merchandise processing fees than he paid to Customs on the company's behalf. Id. ¶ 7, Ex. A (list of 79 entries where Puentes allegedly misrepresented on CF 7501s the value of merchandise, as well as the merchandise processing fees due to Customs).

On September 1, 2009, Florexpo filed a "Prior Disclosure" reporting to Customs conduct that Puentes engaged in during the time that he served as the company's customs broker. Complaint ¶ 8.⁷ In its Prior Disclosure, Florexpo informed Customs that the company "had paid Mr. Puentes the MPF[s] that [were] actually owed on the entries at issue and that it had ‘believed that the correct value information, including MPF[s], was being declared’ " to the agency. Id. ; Crawford Declaration ¶ 7, Exs. C–D (Florexpo's Prior Disclosure and Customs' acceptance of the Prior Disclosure). These findings outlined above are the subject of both Count I and Count II of the Complaint. See Complaint ¶¶ 17–19 (Count I); id. ¶ 25 (Count II, re: 19 C.F.R. § 111.29 ); id. ¶ 31 (Count II, re: 19 C.F.R. § 111.32 ).

Timeliness of CF 7501s . Customs requires that a CF 7501 must be filed for any merchandise that is formally entered for consumption, no more than 10 working days after entry. 19 C.F.R. §§ 142.11(a), 142.12(b). However, between September 2008 and February 2009, Puentes filed CF 7501s out of time for some 250 entries, on behalf of seven separate clients. Complaint ¶ 9, Ex. B (listing the 250 late-filed CF 7501s and identifying the seven clients). These findings are the subject of Count II of the Complaint. Seeid. ¶ 26.

Filing of CF 7501s . Apart from the 250 entries where Puentes late-filed the requisite CF 7501s (discussed immediately above), there were another 58 entries between September 2008 and January 2009 as to which Puentes failed to file any CF 7501s at all. In other words, during that timeframe, Puentes made 58 entries as to which he filed no CF 7501 whatsoever. Complaint ¶ 10, Ex. C (listing the 58 entries as to which no CF 7501s were filed). These findings are the subject of Count II of the Complaint. Seeid. ¶ 26.

Identification of the Importer of Record . Lastly, between April 2009 and April 2010, Puentes filed CF 7501s for 43 entries that identified WorldFresh Express Inc. ("WorldFresh") as the importer of record, although WorldFresh had not authorized Puentes to clear those entries on its behalf and had no knowledge that he was doing so. Complaint ¶¶ 11–13; Crawford Declaration ¶¶ 9–10, Ex. E (Customs' Notice of Action sent to WorldFresh and WorldFresh's response). The actual importer of record for the 43 entries was Puentes himself. Complaint ¶ 13. These findings are the subject of Count II of the Complaint. See id. ¶¶ 27, 32.

Procedural History . Customs sent Puentes both a pre-penalty notice and a penalty notice. Complaint ¶ 14; see also Crawford Declaration ¶ 11; Pl.'s Brief at 3–4, 8. The pre-penalty and penalty notices were followed by four demand letters seeking payment of the $30,000 penalty. Crawford Declaration ¶ 11; Pl.'s Brief at 3–4, 8. With one exception (where, in any event, he failed to follow through), Puentes failed to respond to Customs' notices and demands, and the penalty still remains unpaid. Complaint ¶¶ 20, 33; Crawford Declaration ¶ 11; Pl.'s Brief at 4, 8.⁸

To remedy Puentes' nonpayment, the Government commenced suit in this court, filing its Summons and Complaint on November 25, 2014, and Proof of Service was filed on March 17, 2015. Puentes failed to respond to the Complaint, and, upon Plaintiff's Request for Entry of Default, the Clerk of the Court entered default on September 16, 2015. See Entry of Default (Sept. 16, 2015). The Government subsequently filed the pending Motion for Entry of Default Judgment. Again, Puentes has failed to respond.

II. Standard of Review

A case brought pursuant to 28 U.S.C. § 1582(1) is subject to de novo review. 28 U.S.C. § 2640(a)(6) (providing that, in cases commenced under 28 U.S.C. § 1582, "[t]he Court of International Trade shall make its determinations upon the basis of the record made before the court"); United States v. Santos , 36 CIT ––––, ––––, 883 F.Supp.2d 1322, 1326 (2012). Specifically, in analyzing a penalty enforcement action under § 1582(1), the court must consider both whether the penalty imposed has a sufficient basis in law and fact, and whether Customs accorded the customs broker all the process to which he is entitled by statute and regulation. United States v. Santos , 36 CIT at ––––, 883 F.Supp.2d at 1326 (citation omitted).

Section 2640(a) draws no distinction between the determination as to the validity of a penalty claim and the determination as to the amount of the penalty. 28 U.S.C. § 2640(a) ; United States v. Santos , 36 CIT at ––––, 883 F.Supp.2d at 1326. Therefore, pursuant to § 2640(a), both the validity of a claim for a penalty and the amount of that penalty are reviewed de novo . United States v. Santos , 36 CIT at ––––, 883 F.Supp.2d at 1326 (citation omitted).

When a defendant has been found to be in default, all well-pled facts in the complaint are taken as true for purposes of establishing the defendant's liability. See USCIT R. 8(c)(6) ; 10 James Wm. Moore et al. , Moore's Federal Practice § 55.32[1][a], at 55–38 to 55–39 (3d ed. 2015) ("Moore's Federal Practice"); 10A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2688.1, at 84–92 (4th ed. 2016) ("Wright & Miller"); Finkel v. Romanowicz , 577 F.3d 79, 83–84 & n.6 (2d Cir. 2009) (citing, inter alia , Au Bon Pain Corp. v. Artect, Inc. , 653 F.2d 61, 65 (2d Cir. 1981) ).

That said, however, a default does not admit legal claims. See Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (reasoning, in context of motion to dismiss for failure to state a claim, that when a court accepts factual allegations as true, it does not also accept legal conclusions as true). Thus, an entry of default alone does not suffice to entitle a plaintiff to any relief. Even after an entry of default, "it remains for the court to consider whether the unchallenged facts constitute a legitimate cause of action, since a party in default does not admit conclusions of law." See 10A Wright & Miller § 2688.1, at 91 ; see also 10 Moore's Federal Practice § 55.32[1][b], at 55–40.

Further, even if it is determined that the unchallenged facts constitute a legitimate cause of action, "a default does not concede the amount demanded." See 10A Wright & Miller § 2688, at 80 ; see also 10 Moore's Federal Practice § 55.32[1][c], at 55–41 (explaining that defaulting party "does not admit the allegations in the claim as to the amount of damages"). The plaintiff bears the burden of proving the extent of the relief to which it is entitled. See 10 Moore's Federal Practice § 55.32[1][c], at 55–41. The court is...