United States v. UPS Supply Chain Solutions, Inc., 092917 USCIT, 16-00010
| Opinion Judge | LEO M. GORDON JUDGE. |
| Party Name | UNITED STATES, Plaintiff, v. UPS SUPPLY CHAIN SOLUTIONS, INC., GREAT AMERICAN ALLIANCE INSURANCE CO., AMERICAN SERVICE INSURANCE CO., and 4174925 CANADA INC., Defendants. Slip Op. 17-134 |
| Attorney | Erin K. Murdock-Park, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC for Plaintiff United States. With her on the pleadings were Chad A. Readler, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Patricia M. McCarthy,... |
| Judge Panel | Before: Leo M. Gordon, Judge |
| Case Date | September 29, 2017 |
| Court | Court of International Trade |
Defendant Majestic Mills' motion to dismiss co-Defendant UPS's cross-claim granted in part and denied in part.
Erin K. Murdock-Park, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC for Plaintiff United States. With her on the pleadings were Chad A. Readler, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Patricia M. McCarthy, Assistant Director.
Lars-Erik A. Hjelm and Casey K. Richter, Akin Gump Strauss Hauer & Feld, of Washington, DC for Defendants UPS Supply Chain Solutions, Inc. and Great American Alliance Insurance Company.
John B. Brew and Frances P. Hadfield, Crowell & Moring LLP, of New York, NY for Defendant 4174925 Canada Inc.
T. Randolph Ferguson, Sandler, Travis & Rosenberg, P.A., of San Francisco, CA for Defendant American Service Insurance Company.
Before: Leo M. Gordon, Judge
OPINION AND ORDER
LEO M. GORDON JUDGE.
Before the court is the motion of Defendant 4174925 Canada, Inc. d/b/a Majestic Mills ("Majestic Mills") to dismiss the cross-claims brought by co-Defendant UPS Supply Chain Solutions, Inc. ("UPS"), pursuant to USCIT Rule 12(b)(1) for lack of subject-matter jurisdiction and USCIT Rule 12(b)(6) for failure to state a claim upon which relief can be granted. See Def. Majestic Mills' Mem. Supp. Mot. to Dismiss UPS's Cross-Claim, ECF No. 55 ("Majestic Mills' Mot."); see also UPS's Answer & Cross-Claim, ECF No. 39 ("UPS's Cross-Claim"); Majestic Mills' Answer to Cross-Claim, ECF No. 50 ("Majestic Mills' Cross-Claim Answer"); UPS's Resp. in Opp'n to Majestic Mills' Mot. to Dismiss, ECF No. 61 ("UPS's Resp."); Majestic Mills' Reply in Supp. of Mot. to Dismiss, ECF No. 66 ("Majestic Mills' Reply"). As discussed further below, the court has subject-matter jurisdiction over UPS's cross-claim pursuant to 28 U.S.C. § 1583(1). The court, though, does grant in part Majestic Mills' motion to dismiss pursuant to USCIT Rule 12(b)(6) for failure to state a claim.
I. Background
In the underlying action, Plaintiff United States, on behalf of U.S. Customs and Border Protection ("Customs"), brought claims against Majestic Mills, UPS, American Service Insurance Co. ("ASI"), and Great American Alliance Insurance Co. ("Great American") (collectively, "Defendants") for unpaid duties and civil penalties under Section 592 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1592(a) and (d) (2012).1See Am. Compl. ¶¶ 1, 3, ECF No. 15. Majestic Mills is a Canadian manufacturer of women's apparel and UPS is the customs broker and nominal importer of record of approximately 272 entries of wearing apparel and fabrics ("subject merchandise") on behalf of Majestic Mills. See UPS's Cross-Claim at 6; Majestic Mills' Mot. at 2-3; UPS's Resp. at 1-2. Great American and ASI served as sureties on bonds guaranteeing payment of all duties, taxes, and fees due to the United States on Majestic Mills' entries of the subject merchandise. See Am. Compl. ¶¶ 8-13. Relying on information provided by Majestic Mills, UPS claimed preferential tariff treatment to Customs on these imports under NAFTA Rules of Origin. See Am. Compl. ¶¶ 15-17; UPS's Cross-Claim at 2-3. After Majestic Mills filed an attempted prior disclosure with Customs pursuant to 19 U.S.C. § 1592(c)(5) to correct the classification of its imports, Customs demanded payment from Defendants for unpaid duties and fees. Am. Compl. ¶¶ 20-39. UPS, ASI, and Great American have all settled with the United States, and so the only claims presently remaining before the court are Plaintiff's claim against Majestic Mills, Majestic Mills' counterclaim against Plaintiff, and UPS's cross-claim against Majestic Mills. See Pl.'s Resp. to Mot. to Extend Proceedings (Sept. 9, 2016), ECF No. 45 (explaining settlement with ASI); Order Pursuant to R. 41(a) Dismissing Claims Against ASI (Oct. 5, 2016), ECF No. 48; Joint Motion to Dismiss Claims Against UPS & Great American (Aug. 8, 2017), ECF No. 67 (noting settlement with UPS & Great American); Order Pursuant to R. 41(a)(2) Dismissing Claims Against UPS and Great American (Aug. 9, 2017), ECF No. 70.
In its cross-claim, UPS alleges four causes of action against Majestic Mills. See UPS's Cross-Claim. The first cause of action is for indemnification, as UPS alleges that Majestic Mills agreed to indemnify UPS from any liabilities arising from the importation of the subject merchandise through a series of contractual agreements between the two parties. Id. at 8-10. The other three causes of action-breach of contract, fraud, and negligent misrepresentation-stem from Majestic Mills' provision of inaccurate information to UPS upon which UPS relied to make tariff classifications to Customs. Id. at 10-13. Majestic Mills moves to dismiss UPS's cross-claim on various grounds, including lack of subject-matter jurisdiction, failure to state a claim upon which relief can be granted, inadequate pleading of UPS's claims, and for filing suit outside the applicable statute of limitations. See Majestic Mills' Mot.
II. Standard of Review
The claimant carries "the burden of demonstrating that jurisdiction exists." Techsnabexport, Ltd. v. United States, 16 CIT 420, 422, 795 F.Supp. 428, 432 (1992) (citing McNutt v. Gen. Motors Acceptance Corp., 298 U.S. 178, 189 (1936)). If the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action. USCIT Rule 12(h)(3). In deciding a USCIT Rule 12(b)(1) motion to dismiss that does not challenge the factual basis for the complainant's allegations and a USCIT Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief can granted, the court assumes all factual allegations to be true and draws all reasonable inferences in the claimant's favor. Henke v. United States, 60 F.3d 795, 797 (Fed. Cir. 1995) (subject-matter jurisdiction); Cedars-Sinai Med. Ctr. v. Watkins, 11 F.3d 1573, 1583-84 & n.13 (Fed. Cir. 1993) (failure to state a claim).
For Rule 12(b)(6) motions, a claimant's factual 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 Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim of relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570).
III. Discussion
A. Subject-Matter Jurisdiction
To adjudicate a case, a court must have subject-matter jurisdiction over the claims presented. See Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94-95 (1998). "[W]hen a federal court concludes that it lacks subject-matter jurisdiction, the court must dismiss the [claim] in its entirety." Arbaugh v. Y & H Corp., 546 U.S. 500, 514 (2006). Majestic Mills argues that the court lacks jurisdiction over UPS's cross-claim on two distinct grounds. First, Majestic Mills contends the court cannot exercise jurisdiction over UPS's cross-claim due to the parties' inclusion of a forum selection provision in their contract that purports to place sole jurisdiction over the relevant claims in the federal and state courts of Georgia. See Majestic Mills' Mot. at 10; Majestic Mills' Reply at 6-9. Alternatively, Majestic Mills contends that the subject of UPS's cross-claim is outside the narrow jurisdiction over cross-claims granted to this Court by 28 U.S.C. § 1583. See Majestic Mills' Reply at 9-13.[2]
1. Forum Selection Clause
Majestic Mills argues that the contractual basis for UPS's cross-claim, as evidenced by the 2012 UPS SCS Terms and Conditions produced by UPS, contains a forum selection clause that allegedly places jurisdiction over the parties' disputes relating to this contract solely within the federal and state courts of Georgia. Majestic Mills contends that UPS's reliance on the terms and conditions language and acceptance of those terms as binding necessitates the conclusion that the exclusive federal jurisdiction over cross-claims for actions initiated in this Court granted by § 1583 should yield to the jurisdictional limits imposed by the forum selection clause. As a result, Majestic Mills argues UPS is unable to bring its cross-claim, and this Court lacks jurisdiction to adjudicate that cross-claim. See Majestic Mills' Mot. at 10. Specifically, the terms and conditions language provides: "Customer and Company (a) irrevocably consent to the jurisdiction of the United States District Court and the State courts of Georgia; (b) agree that any action relating to the services performed by Company, shall only be brought in said courts." Id. Although this wording is taken from the 2012 version of the UPS SCS Terms and Conditions and not an earlier edition, which allegedly binds the parties (a copy of which has yet to be produced before the court), UPS concedes the forum selection provision exists and applies in the relevant Terms and Conditions. See UPS's Resp. at 8.
Despite acknowledging the existence of the forum selection provision, UPS argues that the court is not precluded from ruling on its cross-claim and that jurisdiction is still proper under § 1583, which states that "in any civil action in the Court of International Trade, the court shall have exclusive jurisdiction to render judgment upon any counterclaim, cross-claim, or third-party action of any party." Id. (quoting 28 U.S.C. §...
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