US v. Continental Seafoods, Inc.

• Decision Date: 27 October 1987
• Docket Number: Court No. 86-07-00834.
• Citation: 672 F. Supp. 1481,11 CIT 768
• Parties: UNITED STATES, Plaintiff, v. CONTINENTAL SEAFOODS, INC. and National Bonding and Accident Insurance Company, Defendants and Third-Party Plaintiffs, v. SAW MILL INTERNATIONAL CORPORATION, Third-Party Defendant.
• Court: U.S. Court of International Trade

672 F. Supp. 1481

11 CIT 768

UNITED STATES, Plaintiff, v. CONTINENTAL SEAFOODS, INC. and National Bonding and Accident Insurance Company, Defendants and Third-Party Plaintiffs, v. SAW MILL INTERNATIONAL CORPORATION, Third-Party Defendant.

Court No. 86-07-00834.

United States Court of International Trade.

October 27, 1987.

Richard K. Willard, Asst. Atty. Gen., Washington, D.C., Joseph I. Liebman, Atty. in Charge, Intern. Trade Field Office, Civ. Div., Commercial Litigation Branch, U.S. Dept. of Justice (Susan Handler-Menahem), New York City, for plaintiff.

Barnes, Richardson & Colburn (Robert E. Burke and Thomas M. Keating), Chicago, Ill., for defendants and third-party plaintiffs.

Donovan, Maloof, Walsh & Repetto (Thomas P. Parry), New York City, for third-party defendant.

OPINION

TSOUCALAS, Judge:

This action, commenced by plaintiff, the United States, pursuant to 28 U.S.C. § 1582(2) (1982), is presently before the Court on cross-motions for summary judgment. Plaintiff seeks to recover liquidated damages for alleged violations of an entry bond from Continental Seafoods, Inc. ("Continental") and National Bonding & Accident Insurance Co. ("National"), defendants and third-party plaintiffs. Defendants deny liability to plaintiff but seek indemnification from the third-party defendant, Saw Mill International Co. ("Saw Mill"), in the event that judgment is rendered in favor of plaintiff.

Background

Continental, as principal, and National, as surety, had executed a General Term Bond securing the entry of shrimp from India, which was made on July 9, 1979. By virtue of executing that bond, the principal and surety jointly and severally obligated themselves to pay plaintiff an amount equal to the entered value of the merchandise plus estimated duties if in default of the conditions recited in the bond. The provisions of the bond obligated the principal, inter alia, to "mark, label, clean, fumigate, destroy, export, and do any and all other things that lawfully may be required in the case of any and all merchandise found not to comply with the law and regulations governing its admission into the commerce of the United States." Plaintiff's Motion for Summary Judgment, Solinger Affidavit, Bond ¶ 7 (hereinafter "Plaintiff's Motion" at ____).

Pursuant to the authority granted in the Federal Food, Drug, and Cosmetic Act, § 801(a), codified as amended at 21 U.S.C. § 381(a) (1982), the Food and Drug Administration of the Department of Health & Human Services ("FDA"), notified Continental, on July 13, 1979, that it would sample the shrimp. On August 8, 1979, the FDA issued a notice of detention and hearing to Continental stating that the shrimp appeared to contain salmonella bacteria and that the goods must be held intact pending final decision as to their admission. On September 7, 1979, the FDA, in response to Continental's requests, granted fifteen days during which reconditioning of the merchandise could be attempted. Continental failed to successfully recondition the shrimp, and on May 6, 1980, the FDA issued a notice of refusal of admission advising Continental that the shrimp must be exported under the supervision of the Customs Service within ninety days of the date of the notice. Customs was not satisfied that the goods had been so exported, and on February 26, 1981, Customs assessed liquidated damages against Continental in the amount of $29,682.00. Customs later denied petitions for mitigation of the liquidated damages. Despite several demands for payment made on both the principal and surety, neither Continental nor National has paid the assessed damages. Plaintiff commenced the instant action on July 3, 1986.

Pursuant to USCIT R. 14(a), defendants have impleaded Saw Mill which agreed to purchase the subject shrimp for export from Ward Foods, Inc. ("Ward"), then a wholly-owned subsidiary of Continental. As part of that contract, it is asserted that Saw Mill agreed to "release" the third-party plaintiffs from all claims arising from the export of the merchandise. Third-Party Complaint in Court No. 86-07-00834 at 2-3, ¶¶ 7, 9. Therefore, the third-party plaintiffs seek indemnification for any damages that they may owe to plaintiff as a result of this action. In response, Saw Mill denies that it agreed to indemnify Ward and moves for summary judgment dismissing the third-party plaintiffs' complaint. Third-Party Defendant's Motion for Summary Judgment at 3-4 (hereinafter "Third-Party Defendant's Motion" at ____).

In the portion of this opinion numbered (I) the Court discusses serially the defenses raised in opposition to plaintiff's motion for summary judgment. In section (II) of this opinion the Court treats the claim by third-party plaintiffs against Saw Mill.

(I)

A. Statute of Limitations

The parties apparently agree,¹ that the applicable limitations period is six years as specified in 28 U.S.C. § 2415 (1982). DiGiorgio v. United States, 8 CIT 192, 197 n. 9 (1984) (citing United States v. Bavarian Motors, Inc., 4 CIT 83, 87 (1982)). They disagree, however, as to what event commences the running of the statute. Defendants, citing United States v. Atkinson, 6 CIT 257, 575 F.Supp. 791 (1983),² assert that the statute of limitations began to run on September 23, 1979, the date Continental's right to recondition the shrimp expired. Defendants' Motion to Dismiss and for Summary Judgment at 6. Additionally, defendants suggest that, as a policy matter, the notice of refusal of admission should not control the running of the statute since the government "could withhold the issuance of a notice of refusal of admission after a notice of sampling and detention was issued and thereby suspend the statute of limitations from ever running." Defendants' Response in Opposition to Plaintiff's Motion for Summary Judgment at 6 (hereinafter "Defendants' Response" at ____).

Plaintiff's claim arises out of an alleged failure to export the goods under Customs' supervision. The notice of refusal of admission required such exportation within ninety days after May 6, 1980. Assuming a failure to properly export, the claim accrued against defendants on August 5, 1980.³ Hence, this action, commenced on July 3, 1986, which is within six years of August 5, 1980, is timely.

Measured against the foregoing, the defendants' jurisdictional argument is patently deficient. As noted earlier, the breach here is a supposed failure to export under Customs' supervision. Plaintiff does not assert that the bond was breached by a failure to recondition, nor, as in Atkinson, 6 CIT at 258, 575 F.Supp. at 792-93, by a failure to redeliver the goods to Customs. Atkinson sets forth the broad principle that a cause of action accrues from the time the bond — or any contract — is breached. See Atkinson, 6 CIT at 260, 575 F.Supp. at 794. Further reliance on that decision, however, is misplaced since the failure to redeliver at issue in Atkinson is not analogous to the failure to recondition in the instant case. The unsuccessful effort to recondition did not create a cause of action in favor of plaintiff. Instead, liability under the bond arose in this case when defendants failed to comply with the explicit direction to export contained in the notice of refusal of admission.

B. Notice of Refusal of Admission

Defendants contend that the notice of refusal is legally invalid since it was issued after liquidation of the goods in contravention of 19 C.F.R. § 141.113(f) (1987).⁴ They further contend that the notice of sampling and detention and the notice of refusal of admission are invalid because those documents were signed by an FDA official and not by a representative of the Department of the Treasury.

As a threshold matter, plaintiff responds by asserting that the Court is barred from considering these defenses. Since the demand for liquidated damages is a decision as to "charges or exactions" which is clearly protestable under 19 U.S.C. § 1514(a)(3) (1982), plaintiff argues that the defendants must file a timely protest to preserve any defense relating to the assessment of such damages. See Plaintiff's Response to Defendants' Motion to Dismiss and for Summary Judgment at 7 (hereinafter "Plaintiff's Response at ____").

Section 1514,⁵ which authorizes the filing of protests with Customs, is an integral component of a statutory framework that envisions administrative review of protests, see 19 U.S.C. § 1515 (1982), and ultimately, judicial review of the administrative agency's denial of such protests. See 28 U.S.C. § 1581(a) (1982).⁶ While § 1514(a) operates to prevent specified parties from invoking the Court's jurisdiction, as an initial matter, to contest decisions not timely protested, it is less obvious that the statute acts as a prophylactic against the attempt to raise issues defensively. Cf. United States v. Zuber & Co., 9 CIT 511, 512 (1985) (although barred by § 1514 from instituting an action, importer may establish value and classification of merchandise in defending against action commenced pursuant to 19 U.S.C. § 1592). In short, the applicability of § 1514 to a case where jurisdiction properly arises under a statute other than 28 U.S.C. § 1581(a) presents an important question which has not been addressed at all by the parties.

Although cognizant of the discussion in United States v. Bavarian Motors, Inc., 4 CIT 83, 85-86 (1982) of the time limitations upon a surety's right to protest a demand for liquidated damages, this Court understands the holding of that case to be that the government may not institute an action where a properly filed protest has yet to be reviewed by the administrative agency. Id. at 86. The precise issue in the case at bar did not confront the Bavarian Motors court. For that reason, and without questioning any statement contained in that opinion, this Court is reluctant to rely on Bavarian Motors as dispositive of the issue raised here.

In any event, the Court considers this case to be an inappropriate...