US v. Valley Steel Products Co., Court No. 88-08-00686.

• Decision Date: 11 January 1990
• Docket Number: Court No. 88-08-00686.
• Parties: UNITED STATES of America, Plaintiff, v. VALLEY STEEL PRODUCTS COMPANY and Valley Industries, Inc., Defendants.
• Court: U.S. Court of International Trade

729 F. Supp. 1356

14 CIT 14

UNITED STATES of America, Plaintiff, v. VALLEY STEEL PRODUCTS COMPANY and Valley Industries, Inc., Defendants.

Court No. 88-08-00686.

United States Court of International Trade.

January 11, 1990.

Stuart M. Gerson, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, Civil Div., U.S. Dept. of Justice (Platte B. Moring, III), Washington, D.C., of counsel: Kathleen L. Bucholtz, Asst. Regional Counsel, Chicago, Ill., U.S. Customs Service, for plaintiff.

Guilfoil, Petzall & Shoemake (Jim J. Shoemake and Kurt S. Odenwald), St. Louis, Mo., for defendants.

MEMORANDUM OPINION

TSOUCALAS, Judge:

This case is before the Court on defendants' motion to dismiss the complaint on the ground of double jeopardy. The complaint alleges defendants imported forty-three entries of steel products into the United States in violation of 19 U.S.C. § 1592 (1988), and seeks to recover maximum penalties allowed under the statute.

Defendants argue that in light of the punishment the defendants sustained in a prior criminal prosecution in connection with the same conduct, a civil penalty in the amount the Government demands would violate the Double Jeopardy Clause's prohibition against multiple punishments. Specifically, the defendants assert that the Government's demand for the maximum relief "is not rationally related to the goal of making the Government whole, and is so extreme and divorced from the Government's damages and expenses so as to constitute punishment, the imposition of which would violate the defendants' double jeopardy protections." Defendants' Memorandum in Support of Motion to Dismiss at 2.

Background

On October 8, 1986, defendant Valley Steel Products Company (VSPC)¹ was criminally charged in the United States District Court for the Eastern District of Missouri with conspiracy to violate certain statutes, 18 U.S.C. §§ 542, 1001, 1341, and 1343, and 19 U.S.C. §§ 1481, 1485, 1592, and 1673-1677, in violation of the general criminal conspiracy statute, 18 U.S.C. § 371, which prohibits "conspiracy either to commit any offense against the United States, or to defraud the United States, or any agency thereof." The criminal information alleged that VSPC conspired to defraud the United States in the importation of forty-three entries of steel products into the United States by submitting to the United States Customs Service entry documents with material false and fraudulent statements and omissions of material fact. The Government sought to prove that VSPC failed to disclose the payment of rebates or refunds on the imported steel products, thereby inflating their reported prices, in order to circumvent the Trigger Price Mechanism. Under the Mechanism, the prices of imported steel products are monitored to detect dumping: if steel was sold below "the trigger price," an anti-dumping duty investigation could be initiated.

Defendant pleaded nolo contendere to the criminal information. On November 14, 1986, the District Court sentenced the defendant and imposed a criminal fine of $10,000. Judgment and Probation/Commitment Order, Exhibit A, Plaintiff's Opposition to Defendants' Motion to Dismiss the Complaint.

Thereafter, on August 26, 1988, the Government brought the present action in this Court against VSPC and its parent company, Valley Industries, Inc., under 19 U.S.C. § 1592. Subsection (a) of the statute provides for civil sanction against "a person who, by fraud, gross negligence, or negligence ... enters, introduces, or attempts to enter or introduce any merchandise into the commerce of the United States by means of" material false statements or omissions of material fact. Liability may be found "without regard to whether the United States is or may be deprived of all or a portion of any lawful duty."

The remedial provision of the statute, 19 U.S.C. § 1592(c)(1), states: "A fraudulent violation of the statute is punishable by a civil penalty in an amount not to exceed the domestic value of the merchandise." The standards for the remaining alternative counts of liability are:

(2) Gross negligence

A grossly negligent violation of subsection (a) of this section is punishable by a civil penalty in an amount not to exceed —

(A) the lesser of —

(i) the domestic value of the merchandise, or

(ii) four times the lawful duties of which the United States is or may be deprived, or

(B) if the violation did not affect the assessment of duties, 40 percent of the dutiable value of the merchandise.

(3) Negligence

A negligent violation of subsection (a) of this section is punishable by a civil penalty in an amount not to exceed—

(A) the lesser of —

(i) the domestic value of the merchandise, or

(ii) two times the lawful duties of which the United States is or may be deprived, or

(B) if the violation did not affect the assessment of duties, 20 percent of the dutiable value of the merchandise.

The Government has prayed in the alternative for recovery of the maximum penalty permitted for each of the three levels of liability set forth in 19 U.S.C. § 1592. Therefore, the Government seeks, in the case of fraud, civil damages in the amount of $13,452,479.00, which represents the total domestic value of the imported merchandise. If gross negligence is found, the Government prays for a recovery of $4,014,584.00, or forty percent of the dutiable value of the forty-three consumption entries of steel in question. Alternatively, in case of negligence, the Government requests $2,007,292.00, which reflects twenty percent of the dutiable value of the subject merchandise.

Discussion

The Double Jeopardy Clause prohibits multiple punishments for the same conduct. See, e.g., North Carolina v. Pearce, 395 U.S. 711, 717, 89 S.Ct. 2072, 2076, 23 L.Ed.2d 656 (1969). In general, there is no double jeopardy in the civil enforcement of a remedial sanction. See e.g., Helvering v. Mitchell, 303 U.S. 391, 58 S.Ct. 630, 82 L.Ed. 917 (1938); United States ex rel. Marcus v. Hess, 317 U.S. 537, 63 S.Ct. 379, 87 L.Ed. 443 (1943); Rex Trailer Co. v. United States, 350 U.S. 148, 76 S.Ct. 219, 100 L.Ed. 149 (1956). In United States v. Halper, ___ U.S. ___, 109 S.Ct. 1892, 104 L.Ed.2d 487 (1989), the Supreme Court determined that "in a particular case a civil penalty authorized by the statute may be so extreme and so divorced from the Government's damages and expenses as to constitute punishment." Id. 109 S.Ct. at 1898. A penalty assessed in a civil proceeding qualifies as "punishment" when "a defendant who already has been punished in a criminal prosecution is subjected to an additional civil sanction to the extent that the second sanction may not fairly be characterized as remedial, but only as a deterrent or retribution." Id. at 1902. Applying this rule to the facts in Halper,² the Supreme Court concluded that the Double Jeopardy Clause was violated.

Defendants argue that a similar conclusion must be reached in this case, because "the facts of this case fall squarely within those facts discussed in Halper, and involve the very same injustices which Halper sought to address." Defendants' Memorandum in Support of Motion to Dismiss at 7-8.

In the Court's opinion, the defendants have overread the applicability of Halper to civil recovery actions brought under 19 U.S.C. § 1592. What the Supreme Court announced in Halper was "a rule for the rare case, ... where a fixed-penalty provision subjects a prolific but small-gauge offender to a sanction overwhelmingly disproportionate to the damages he has caused." Id. at 1902 (emphasis added). With a fixed penalty provision, it is possible to reasonably anticipate whether a civil sanction, when imposed, "is so divorced from any remedial goal that it constitutes `punishment' for the purpose of double jeopardy analysis." Id. at 1899. Unlike the situation in Halper, the remedial formula authorized under 19 U.S.C. § 1592 does not fix a civil penalty; rather, it establishes the maximum penalty which is the domestic or dutiable value of the merchandise, and gives the Court discretionary authority to determine the size of such penalty. Therefore, the rule in Halper cannot serve as the basis for dismissing this action; the amount of civil penalty remains to be assigned by the Court consistent with its sound discretion.³

The remedial scheme under 19 U.S.C. § 1592 is comparable to a form of liquidated damages, the type of sanction for which Halper expressed an approval. The Government "may demand compensation according to somewhat imprecise formulas, such as reasonable liquidated damages or a fixed sum plus double damages, without being deemed to have imposed a second punishment for the purpose of double jeopardy analysis." Halper at 1900; see also Helvering v. Mitchell, supra (collection of deficiency in tax plus a 50% additional amount specified by statute on account of fraud, after acquittal of the criminal charge of tax evasion, does not subject the taxpayer to double jeopardy); Marcus v. Hess and Rex Trailer...