US v. Dantzler Lumber & Export Co., Court No. 90-11-00600.

• Court: U.S. Court of International Trade
• Writing for the Court: AQUILINO
• Citation: 810 F. Supp. 1277,16 CIT 1050
• Parties: UNITED STATES of America, Plaintiff, v. DANTZLER LUMBER & EXPORT COMPANY, a Florida corporation (a/k/a Dantzler Lumber & Export Company, Inc., a/k/a Dantzler Lumber and Export Company, a/k/a Dantzler Lumber & Export Co., a/k/a Dantzler Lumber & Export Inc., a/k/a Dantzler Building Specialties, Inc., a/k/a Dantzler Building Specialties Div., Inc.), and Antonio D. Godinez, Defendants.
• Docket Number: Court No. 90-11-00600.
• Decision Date: 15 December 1992

810 F. Supp. 1277
16 CIT 1050

UNITED STATES of America, Plaintiff,
v.
DANTZLER LUMBER & EXPORT COMPANY, a Florida corporation (a/k/a Dantzler Lumber & Export Company, Inc., a/k/a Dantzler Lumber and Export Company, a/k/a Dantzler Lumber & Export Co., a/k/a Dantzler Lumber & Export Inc., a/k/a Dantzler Building Specialties, Inc., a/k/a Dantzler Building Specialties Div., Inc.), and Antonio D. Godinez, Defendants.

Court No. 90-11-00600.

United States Court of International Trade.

December 15, 1992.

810 F. Supp. 1278

Stuart M. Gerson, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, U.S. Dept. of Justice, Civ. Div., Jeanne Davidson and Lloyd M. Green; Richard S. Friedland, Asst. Regional Counsel, U.S. Customs Service, of counsel, Washington, DC, for plaintiff.

Fotopulos, Spridgeon & Perez, P.A., Thomas E. Fotopulos, Tampa, FL, for defendants.

810 F. Supp. 1279

OPINION AND ORDER

AQUILINO, Judge:

This action is the aftermath of defendants' trial by jury of a criminal indictment, which led to entry of judgments of conviction against them on 24 of 34 counts in the U.S. District Court for the Southern District of Florida, 89-107-CR-JWK, aff'd sub nom. United States v. Godinez, 922 F.2d 752, reh'g and reh'g en banc denied (11th Cir.1991.)

Under 19 U.S.C. § 1592 and 28 U.S.C. § 1582, the plaintiff has served and filed an amended complaint in this Court of International Trade, alleging causes of action based on fraud, gross negligence and negligence within the meaning of section 1592 and praying for imposition of penalties thereunder amounting to $1,521,701.00, $325,854.92 and $162,927.46, respectively. The defendants have interposed an answer, demanding another jury trial and asserting affirmative defenses that (a) this action is time-barred to the extent it is based upon entries of merchandise more than five years prior to its commencement, (b) recovery of penalties on entries already the subject of the criminal punishment would violate the double jeopardy clause of the Fifth Amendment to the Constitution, (c) all of the entries herein have been finally and conclusively liquidated, (d) the pre-penalty and penalty notices issued by the U.S. Customs Service were unlawful and (e) the Service has already mitigated the penalties prayed for.

The plaintiff has responded with a motion to strike these defenses and for judgment on the pleadings as to twelve consumption entries, upon which the defendants were convicted of violating 18 U.S.C. §§ 1001 and 1002.¹ They in turn move for judgment on the pleadings, dismissing this action in its entirety, which has precipitated another motion by the plaintiff, this one for summary judgment on all 36 entries at issue herein, including 13 of the 17 enumerated in the criminal indictment.

I

Among other things, the amended complaint alleges the following:

6. From on or about January 18, 1984 through October 17, 1986, defendants ... entered or introduced, or caused to be entered or introduced, or aided and abetted the entry or introduction of ... "virola/ceiba" — faced plywood from Brazil into the United States....

7. At all material times, the importation of plywood faced with softwood from South America to the United States was free of duty, while plywood faced with hardwood was subject to a customs duty in the amount of eight (8) percent ad valorem, pursuant to item no. 240.2360 of the Tariff Schedules of the United States....

8. In the computation of duty, woods were at all pertinent times defined consistently with the following botanical classification: "hardwood" species are trees with broad leaves (deciduous trees); and, "softwood" species come from trees with needles (conifers).

9. Woods of the "virola" type are a "hardwood"....

10. ... Defendants imported plywood faced with hardwood identified as "virola" into the United States ... on approximately 36 occasions. On all such entries, the duty due was falsely declared as zero (no duty) ... and no duty was, in fact, paid by defendants upon importation of the plywood.

810 F. Supp. 1280

11. On most such occasions, the plywood was falsely declared ... as faced with softwood. On a few such occasions, the plywood was falsely described as "particle-board".

12. The actions referenced in paragraphs 10 and 11 of this complaint were the result of the willful and knowing actions of the defendants, who caused these materially false declarations to be made, and they fully knew that all woods marketed as "virola" were hardwoods, and that plywood faced with any of them required, under United States law, an eight (8) percent ad valorem customs duty.

* * * * * *

15. The effect of defendants' actions was to evade the payment of customs duty owed, thereby allowing plywood faced with "virola" to be sold at below-market prices or at greater profit. Between January 1984 and October 1986, approximately $81,463.73 of customs duty was illegally evaded by Dantzler.

In their motion to dismiss these claims, the defendants point first to the statutory limitation of actions such as this found in section 621 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1621, to wit:

No suit or action to recover any pecuniary penalty or forfeiture of property accruing under the customs laws shall be instituted unless such suit or action is commenced within five years after the time when the alleged offense was discovered: Provided, That in the case of an alleged violation of section 1592 of this title arising out of gross negligence or negligence, such suit or action shall not be instituted more than five years after the date the alleged violation was committed: ...

A

As quoted above, the period of time on which the government focuses is January 18, 1984 through October 17, 1986. This action was commenced on November 21, 1990, and the defendants point out that 22 of the entries at issue occurred more than five years prior to that date, namely, those listed on exhibit A to the amended complaint as (1) through (10), (17) to (20), and (29) through (36).

According to the governing statute, supra, the date gross negligence or negligence within the meaning of section 1592 allegedly "was committed" starts the clock running for actions based on such allegations. Those tied to the foregoing, specified entries and encompassed by plaintiff's second pleaded cause of action (gross negligence) and third cause of action (negligence) are thus time-barred, and defendants' motion for judgment as to them must be granted. Indeed, opposing counsel do not now argue otherwise.²

B

As indicated, the defendants would extend this summary relief to the same 22 entries covered by the first pleaded cause of action for fraud. They argue in regard to those entries that the accompanying documents were clear as to the proposed classification, albeit now alleged to have been fraudulent, which Customs thus could have and should have recognized each time a shipment was admitted. And in furtherance of their proposed rule of constructive discovery, the defendants point to a letter dated July 31, 1984 to the Service in which they requested refund of duties paid on one entry "due to a clerical error".³ Their exhibit D is a Customs "Notice of Action" on a July 23, 1984 entry for lack of a Form A among its papers. According to the defendants, in order to issue such an advisory,

810 F. Supp. 1281

"the Customs Service import specialist would have had to review the entry documents, which again clearly describe the imported product as `white virola' plywood."<sup>4</sup> They refer to United States v. R.I.T.A. Organics, Inc., 487 F.Supp. 75, 77 (N.D.Ill. 1980), to the effect that actual discovery "may not be invoked by a plaintiff who fails to exercise `reasonable care and diligence in seeking to learn the facts which would disclose' the alleged wrong", quoting Morgan v. Koch, 419 F.2d 993, 997 (7th Cir.1969)

In the context of an action such as this, the court in United States v. Brown, 404 F.Supp. 968 (S.D.N.Y.1975), aff'd, 538 F.2d 315 (2d Cir.1976), referred to the ratio of import transactions (some 2,000) to the number of import specialists (approximately 80) responsible for review thereof. In contrast, the plaintiff represents herein that the Tampa, Florida office of the Service processed a minimum of 23,044 entries annually during the period in question, and, "at best", only four import specialists worked there. Reply Memorandum in Support of Plaintiff's Motion for Summary Judgment, p. 10.

Whatever the numbers, the issue of discovery of fraud does not lend itself solely to mathematical resolution. Subjectivity also is an element. Hence, receipt of information in the regular course of business does not automatically signify knowledge of fraud on the part of the recipient.⁵ Generally, only after all the facts have been developed can the moment of discovery be discerned.

To quote from United States v. Alcatex, Inc., 328 F.Supp. 129, 134 (S.D.N.Y.1971), "as to when the violations were discovered, or should reasonably have been discovered ..., the most that can be said for defendants' position is that there are material issues of fact precluding summary judgment." See also CIT Rule 56(d); United States v. Neman Brothers & Associates, 15 CIT ___, 777 F.Supp. 962 (1991); United States v. Kingshead Corp., 13 CIT 660, 1989 WL 90796 (1989). In sum, any dismissal of the claims in plaintiff's first pleaded cause of action on the basis of their timing must await trial.

II

Paragraph 20 of the amended complaint sets forth the twelve entries upon which the defendants were convicted of violating the referenced sections of Title 18, U.S.C. In their answer, the defendants admit the averment. And the plaintiff now moves for judgment on the pleadings, arguing that the "defendants are collaterally estopped from denying liability for their fraudulent violations of 19 U.S.C. § 1592 with respect to those twelve entries."⁶

A

On the question of their timing, comparison of the list in paragraph 20...