United States v. Sterling Footwear, Inc.

• Decision Date: 12 October 2017
• Docket Number: Slip Op. 17–141,Court No. 12–00193
• Citation: 279 F.Supp.3d 1113
• Parties: UNITED STATES, Plaintiff, v. STERLING FOOTWEAR, INC., et al., Defendants.
• Court: U.S. Court of International Trade

279 F.Supp.3d 1113

UNITED STATES, Plaintiff,

v.STERLING FOOTWEAR, INC., et al., Defendants.

Slip Op. 17–141

Court No. 12–00193

United States Court of International Trade.

October 12, 2017

Mikki Cottet, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, argued for Plaintiff. With her on the brief were Chad A. Readler, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Claudia Burke, Assistant Director. Of counsel on the brief was Meredith A. Johnson, Attorney, Office of the Associate Chief Counsel, U.S. Customs and Border Protection, Long Beach, CA.

Thomas Andrew Fasel, Fasel Law, of Newport Beach, CA, argued for Defendants.

OPINION AND ORDER

Barnett, Judge:

The United States of America ("Plaintiff" or the "Government") sued Sterling Footwear, Inc. ("Sterling"), Alex Ryan Ng ("Ng"), and Ng Branding, LLC ("Ng Branding") (collectively, "Defendants"), to recover unpaid duties and a monetary penalty pursuant to section 592 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1592 (2012),¹ and interest pursuant to 19 U.S.C. § 1505, on 337 entries of footwear it contends Sterling incorrectly classified as "rubber tennis shoes" pursuant to subheading 6402.91.40 of the Harmonized Tariff Schedule of the United States ("HTSUS").² See generally Compl., ECF No. 2. Ng seeks summary judgment as to his personal liability. Def. Alex Ng's Mot. for Summ. J. and Def. Alex Ng's Mem. of Law and Points of Authorities in Supp. of Mot. for Summ. J. ("Ng's MSJ"), ECF No. 53.³ The Government cross-moves for summary judgment against all Defendants. Pl.'s Cross–Mot. for Summ. J. Against Def. Alex Ng and Mot. for Summ. J. Against Defs. Sterling Footwear, Inc. and Ng Branding, LLC ("Pl.'s XMSJ"), ECF No. 62. The court has subject matter jurisdiction pursuant to 28 U.S.C. § 1582. For the reasons discussed below, Ng's motion for summary judgment will be denied; the Government's cross-motion for summary judgment against Ng will be denied; and the Government's motion for summary judgment against Sterling and Ng Branding will be granted in part and denied in part.

BACKGROUND

I. Material Facts Not Genuinely in Dispute

Pursuant to U.S. Court of International Trade ("USCIT") Rules 56(c)(1)(A) and 56.3(a), movants are to present material facts as short and concise statements, in numbered paragraphs, with citations to "particular parts of materials in the record" as support. See USCIT Rule 56.3(a) ("factual positions described in Rule 56(c)(1)(A) must be annexed to the motion in a separate, short and concise statement, in numbered paragraphs"). In responsive papers, the opponent "must include correspondingly numbered paragraphs responding to the numbered paragraphs in the statement of the movant." USCIT Rule 56.3(b). "If a party fails to properly ... address another party's assertion of fact as required by Rule 56(c), the court may ... consider the fact undisputed for purposes of the motion." USCIT Rule 56(e)(2).

Parties submitted separate statements of undisputed material facts with their respective motions and responses to the opposing party's statements. See Def. Alex Ng's Statement of Mat. Facts Not in Dispute Pursuant to USCIT [ Rule] 56.3 ("DSOF"), ECF No. 53–1; Pl.'s Resp. to Def. Alex Ng's Rule 56.3 Statement ("Pl.'s Resp. to DSOF"), ECF No. 64; Pl.'s Rule 56.3 Statement ("PSOF"), ECF No. 63; Defs. Sterling Footwear, Inc., Alex Ryan Ng and Ng Branding, LLC's Joint Resp. to Pl.'s USCIT [ Rule] 56.3 Statement ("Defs.' Resp. to PSOF"), ECF No. 84–3. Upon review of Parties' facts (and supporting exhibits),⁴ the court finds the following material facts not genuinely disputed.⁵

A. Sterling

On April 23, 2007, Ng incorporated Sterling, an importer and wholesaler of footwear, in the State of California. PSOF ¶¶ 1, 5; Defs.' Resp. to PSOF ¶¶ 1, 5; see also PSOF ¶ 11; Defs.' Resp. to PSOF ¶ 11 (Ng created and founded Sterling). Sterling began importing footwear on July 17, 2007. PSOF ¶ 50; Defs.' Resp. to PSOF ¶ 50; Pl.'s Ex. 1 (Decl. of Benjamin L. Whitney) ("Whitney Decl."), ECF No. 62–2, Attach. A (Letter from Benjamin Whitney, Import Specialist, to Jonathan Erece, Supervisory Import Specialist, regarding a proposed penalty for Sterling) (Dec. 28, 2009) ("Proposed Penalty Letter") at 2, ECF No. 62–3 (providing Sterling's importer of record number). From July 2007 to October 2009, Sterling made 363 entries of footwear that entered the United States at the Los Angeles/Long Island Beach seaport and the Los Angeles International Airport. PSOF ¶ 51; Defs.' Resp. to PSOF ¶ 51.

Sterling imported and sold several types of shoes, including "flip flops, sandals, heels, boots, and sneakers (high tops and low tops), made from a variety of textiles, leathers, rubber, or combination of materials." PSOF ¶ 35; Defs.' Resp. to PSOF ¶ 35; see also Pl.'s Ex. 9, ECF Nos. 93–5, 93–6 (photographs of samples of Sterling's 2009 footwear); Pl.'s Physical Ex. 1, ECF No. 95 (physical samples of Sterling's 2009 footwear). Sterling created its own footwear designs, which were manufactured in Vietnam to Sterling's specifications. PSOF ¶ 36; Defs.' Resp. to PSOF ¶ 36. Sterling sold its footwear to Philip Simon Design, Inc. ("Philip Simon"), using the brand name "Ed Hardy." PSOF ¶ 37; Defs.' Resp. to PSOF ¶ 37. Philip Simon placed orders with Sterling for "specific footwear style numbers," which corresponded to specific designs, colors, and material. PSOF ¶ 38; Defs.' Resp. to PSOF ¶ 38. Before satisfying purchase orders, Sterling had samples made "to ensure that its footwear was manufactured to its specifications and met its quality control standards." PSOF ¶ 39; Defs.' Resp. to PSOF ¶ 39.

Ng was Sterling's president, chief executive officer, and majority shareholder (owning at least 95% of the shares). PSOF ¶¶ 2, 13; Defs.' Resp. to PSOF ¶¶ 2, 13; see also DSOF ¶¶ 1–2; Pl.'s Resp. to DSOF ¶¶ 1–2; Ng's Ex. D (deposition of Ty V. Ngo) ("Ngo Dep.") at 38:22–39:14, ECF No. 53–3 (testifying to a five percent ownership interest in Sterling).⁶ Ng controlled Sterling' finances, the distribution of its dividends, and the sale of its assets. PSOF ¶ 15; Defs.' Resp. to PSOF ¶ 15; see also PSOF ¶¶ 12, 21(1) (Ng determined who owned Sterling's shares); Defs.' Resp. to PSOF ¶¶ 12, 21(1). Ng was the "ultimate decision-maker" for certain of Sterling's business decisions, including the creation of its production department, which was responsible for handling entries; hiring and promoting employees, and delegating authority thereto; and the design, development, and manufacture of Sterling's imported footwear. PSOF ¶ 21(2),(4),(6); Defs.' Resp. to PSOF ¶¶ 21(2),(4),(6); see also PSOF ¶ 31; Defs.' Resp. to PSOF ¶ 31 ("Ng actively participated in" the design and manufacture of Sterling's footwear); DSOF ¶ 88; Pl.'s Resp. to DSOF ¶ 88 ("[ ] Ng set up a production department at Sterling's offices."); Ng's Ex. Y (Decl. of Alex Ng) ("Ng Decl.") ¶ 7, ECF No. 53–7 (Ng's "primary responsibilit[ies]" consisted of footwear design, "marketing, sales and establishing relationships with Chinese manufactur [ers]").

In August 2007, Ng hired Janet Huynh ("Ms. Huynh") "to handle production, i.e., to work with Sterling's customs brokers to enter Sterling's footwear." PSOF ¶ 24; Defs.' Resp. to PSOF ¶ 24. Three months later, Ms. Huynh became Sterling's general manager; she subsequently hired Nancy Ng⁷ "to oversee Sterling's entries and to work with Sterling's customs brokers." PSOF ¶ 41; Defs.' Resp. to PSOF ¶ 41; DSOF ¶ 111; Pl.'s Resp. to DSOF ¶ 111; see also DSOF ¶ 96; Pl.'s Resp. to DSOF ¶ 96 (Ms. Huynh and Ms. Ng "were the only members of Sterling's production department"). Ms. Ng had prior experience working for a customs broker and filing entries on clients' behalf. PSOF ¶ 42; Defs.' Resp. to PSOF ¶ 42.

B. The Subject Entries

Plaintiff asserts that, of Sterling's 363 footwear entries, 337 entries, which are at issue here, asserted classification pursuant to HTSUS 6402.91.40. PSOF ¶¶ 52, 56. USCIT Rule 56(c)(1)(A) provides that "[a] party asserting that a fact cannot be ... genuinely disputed must support the assertion by [ ] citing to particular parts of materials in the record ...." In accordance with Rule 56(c)(1)(A), Plaintiff offers several pieces of evidence supporting its assertion that Sterling asserted classification pursuant to HTSUS 6402.91.40 for the 337 entries. See Whitney Decl. ¶¶ 19–71 (discussing CBP's examination of certain of Sterling's entries); Whitney Decl. ¶ 90 (averring that CBP reviewed all of Sterling's entries); Whitney Decl. ¶¶ 91–94 (discussing CBP's processing of rate advances for all entries that had not yet liquidated or were within 90 days of liquidation, and CBP's examination of already-liquidated entries); Whitney Decl. ¶ 112 (averring the amount of unpaid duties stemming from the subject 337 entries); Proposed Penalty Letter at 1; Proposed Penalty Letter, Ex. D, ECF No. 62–3 (detailing a rate advance for one entry); Proposed Penalty Letter, Ex. M, ECF No. 62–4 (detailing rate advances for 186 entries); Proposed Penalty Letter, Ex. S, ECF No. 62–6 (summarizing the 337 subject entries).

Defendants assert, without citing any evidentiary support, that Sterling entered "certain footwear" pursuant to HTSUS 6402.91.40. Defs.' Resp. to PSOF ¶ 56. "If a party fails to ... properly address another party's assertion of fact as required by Rule 56(c), the court may: (1) give an opportunity to properly support or address the fact; [or] (2) consider the fact undisputed for purposes of the motion." USCIT Rule 56(e)(1)-(2).

At oral argument, the court endeavored to ascertain whether there was a genuine dispute about the classification asserted in the subject entry summaries, which were not made part of the summary judgment record. Plaintiff informed the court that the entry summaries had been produced during discovery and Defendants had not disputed their accuracy. Oral Arg. 5:30– 6:02.⁸ Defendants asserted that "there might...