United States Court of Appeals
for the Federal Circuit
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HARTFORD FIRE INSURANCE COMPANY,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
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2010-1198
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Appeal from the United States Court of International
Trade in case no. 07-CV-0067, Chief Judge Donald C.
Pogue.
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Decided: August 11, 2011
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FREDERIC D. VAN ARNAM, JR. Barnes, Richardson &
Colburn, of New York, New York, argued for plaintiff-
appellant. With him on the brief was ERIC W. LANDER.
CLAUDIA BURKE, Senior Trial Counsel, Commercial
Litigation Branch, Civil Division, United States Depart-
ment of Justice, of Washington, DC, argued for defendant-
appellee. With her on the brief were TONY WEST, Assis-
tant Attorney General, JEANNE E. DAVIDSON, Director,
and FRANKLIN E. WHITE, JR., Assistant Director.
HARTFORD FIRE v. US 2
__________________________
Before RADER, Chief Judge, PLAGER and LOURIE, Circuit
Judges.
Opinion for the court filed by Circuit Judge PLAGER.
Dissenting opinion filed by Circuit Judge LOURIE.
PLAGER, Circuit Judge.
This is a suretyship case arising under the customs
laws of the United States. The surety was barred from
suing to challenge its liability under its surety contract on
the grounds that, because it knew of its potential protest
grounds in time to file its protest administratively within
the time period provided in 19 U.S.C. § 1514(c)(3), it could
not bring a lawsuit under the special provisions of 28
U.S.C. § 1581(i). Because we conclude that the United
States Court of International Trade (“Court of Interna-
tional Trade”) erred in determining that the surety’s
claim accrued prior to the end of the protest period, we
reverse the dismissal of the complaint and remand the
case for further proceedings consistent with this opinion.
BACKGROUND
During one month in the summer of 2003, Sunline
Business Solutions Corporation (“Sunline”) imported
eight entries of frozen cooked crawfish from the People’s
Republic of China. These entries are referred to as the
“Hubei entries” by the parties and the Court of Interna-
tional Trade. United States Customs and Border Protec-
tion (“Customs”) law requires that importers post
securities for entries of imported merchandise. 19 C.F.R.
§ 142.4. Importers often use a surety bond as a method of
posting the required security, whereby the surety guaran-
tees to the United States that it will pay the importer’s
3 HARTFORD FIRE v. US
entry obligation should the importer fail to make its
required payment. Sunline procured its required eight
single entry bonds, see 19 C.F.R. § 113.62, for the Hubei
entries from Appellant Hartford Fire Insurance Company
(“Hartford”).
At the time of entry into the United States, the Hubei
entries were subject to an existing antidumping order (A-
570-848-036). However, following an administrative
review of that order by the International Trade Admini-
stration, the Hubei entries were liquidated, as defined in
19 C.F.R. § 159.1, and a new, higher, antidumping duty
rate was levied. See Freshwater Crawfish Tail Meat from
the People’s Republic of China; Notice of Final Results of
Antidumping Duty Administrative Review, and Final
Rescission of Review, in Part, 69 Fed. Reg. 61,636 (Dep’t
of Commerce Oct. 20, 2004) (notice of final results of
admin. review). By June 22, 2005, Sunline had not made
a payment for these additional antidumping duties, so
Customs sought to obtain the payment from Sunline’s
surety, Hartford. Hartford Fire Ins. Co. v. United States,
679 F. Supp. 2d 1362, 1364 (Ct. Int’l Trade 2009).
Meanwhile, in May of 2005, Hartford’s counsel
learned from an individual connected with a Customs
brokerage firm that personnel from Sunline had been
arrested for using false invoices. See United States v.
Shen, No. 03-CR01208 (C.D. Cal. Nov. 25, 2003). On June
3, 2005, Hartford undertook an investigation into the
Shen matter by filing a Freedom of Information Act
(“FOIA”) request with Customs. Then, on October 7,
2005, Hartford requested a copy of the Shen criminal case
file from the Central District of California. From investi-
gating the Shen case file, Hartford believed it learned of
potential grounds upon which it could deny liability
HARTFORD FIRE v. US 4
regarding Customs demand for payment. Hartford, 679
F. Supp. 2d at 1367.
Specifically, within the Shen case file there was a let-
ter dated June 19, 2003, from Shanghai Taoen Interna-
tional Trading Company (“STI”) to Customs alleging that
illegal importations of crawfish tailmeat from China were
occurring. This notification to Customs occurred more
than a month before Hartford began issuing surety bonds
to Sunline for the Hubei entries. Following the receipt of
the STI letter, Customs began an investigation into the
importation of crawfish tailmeat from China. Hartford
alleges in its amended complaint that the failure of Cus-
toms to disclose its crawfish tailmeat investigation to
Hartford prior to its issuance of the Sunline surety bonds
constitutes a material misrepresentation by Customs,
thus making the bonds voidable at Hartford’s election.
Pursuant to 19 U.S.C. § 1514, Hartford had 90 days in
which to file an administrative protest with Customs from
the mailing date of the notice of demand for payment
against its bonds—which it did not do. Instead, on Feb-
ruary 7, 2007, Hartford filed suit under 28 U.S.C. §
1581(i) in the Court of International Trade, seeking to
have its surety bonds with Sunline voidable at Hartford’s
option because of the information it discovered after
investigating the Shen case file. Id. at 1365.
Subsection 1581(i) of title 28 grants exclusive jurisdic-
tion to the Court of International Trade over:
[A]ny civil action commenced against the United
States, its agencies, or its officers, that arises out
of any law of the United States providing for—
(1) revenue from imports or tonnage;
5 HARTFORD FIRE v. US
(2) tariffs, duties, fees, or other taxes on
the importation of merchandise for rea-
sons other than the raising of revenue;
(3) embargoes or other quantitative re-
strictions on the importation of merchan-
dise for reasons other than the protection
of the public health or safety; or
(4) administration and enforcement with
respect to the matters referred to in para-
graphs (1)-(3) of this subsection and sub-
sections (a)-(h) of this section.
In the Court of International Trade, Hartford argued that
jurisdiction is proper under this subsection because it did
not learn of the basis for its cause of action until after the
protest period expired, thus it was not possible for it to
bring an administrative protest under 19 U.S.C. §
1514(c)(3). The trial court disagreed with Hartford and
held that, because Hartford “could and should have
reasonably known of the existence of its present claims
against Customs within the statutorily prescribed time
period for filing a protest,” and because Hartford’s claims
are within the scope of protestable claims under 19 U.S.C.
§ 1514(c)(3), a law suit pursuant to subsection 1581(i) is
unavailable; in effect, the court lacks subject matter
jurisdiction. Hartford, 679 F. Supp. 2d at 1368.
Hartford timely appealed the decision of the Court of
International Trade. We have jurisdiction pursuant to 28
U.S.C. § 1295(a)(5).
HARTFORD FIRE v. US 6
DISCUSSION
As with other questions of law, we review the Court of
International Trade’s jurisdictional rulings without
deference. JCM, Ltd. v. United States, 210 F.3d 1357,
1359 (Fed. Cir. 2000).
The question is whether Hartford is entitled to bring
a lawsuit under section 1581(i), challenging the Govern-
ment’s demand, for payment under the surety contract.
In interpreting the very broad language of section 1581(i),
we have limited its scope so that it “may not be invoked
when jurisdiction under another subsection of section
1581 is or could have been available, unless the remedy
provided under that other subsection would be manifestly
inadequate.” Int’l Custom Prods. v. United States, 467
F.3d 1324, 1327 (Fed. Cir. 2006) (quoting Norcal/Crosetti
Foods, Inc. v. United States, 963 F.2d 356, 359 (Fed. Cir.
1992)). The application of such a standard is simple
enough for the majority of protests eligible to be filed
administratively by a surety under 19 U.S.C. § 1514(c).
But in the “unusual situation where a claim does not
accrue until after the protest period has expired,” this
court has observed that “[n]o administrative [protest]
procedure exists.” St. Paul Fire & Marine Ins. Co. v.
United States, 959 F.2d 960, 964 (Fed. Cir. 1992). Fur-
thermore, because “[a] surety must have some grounds for
objecting to the government’s demand,” it cannot simply
file a placeholder protest while it searches for a protesta-
ble basis. Id. at 963. Therefore, this court has recognized
that if the grounds for the administrative protest were not
known and could not have reasonably been known until
after the protest period expires, section 1581(i) is an
appropriate jurisdictional basis for bringing the suit. Id.
7 HARTFORD FIRE v. US
at 964 (citing Chevron U.S.A., Inc. v. United States, 923
F.2d 830, 834 (Fed. Cir. 1991)).
Here, the trial judge found that Hartford reasonably
should have known about the protest grounds in May
2005 when it first heard about the Shen case. Hartford,
679 F. Supp. 2d at 1367. In our view, such a conclusion
fails to fully appreciate the circuitous route involved
before Hartford was able to discover its alleged causes of
action. First, Hartford only indirectly learned of the Shen
matter—its counsel heard about it from a third party.
Second, the Shen case involved entirely different ship-
ments of crawfish, which were not the subject of any
surety bond issued by Hartford. Third, the Shen case was
brought against two individuals who worked for Sunline
and not against the company itself; in fact, Sunline was
never named in the Shen case as a party. The circum-
stances leading up to Hartford’s eventual discovery of the
information it alleges to support its causes of action
remind one of a detective story filled with happenstance,
rather than what might be expected to surface as a result
of routine uncovering of information through the exercise
of due diligence.
The trial court noted that Hartford did not request a
copy of the Shen criminal case file until a full four months
later from the date its outside counsel first heard of the
matter. Hartford, 679 F. Supp. 2d at 1367. Even if
Hartford might have suspected something was going on
with Sunline based on the criminal indictment of two of
its employees that does not necessarily mean that Hart-
ford would have reason to suspect that a potential protest
ground for its unrelated bond demand would exist
amongst the publicly available documents filed in the
Shen case.
HARTFORD FIRE v. US 8
The trial court cites to the Pomeroy case as support
for its finding that Hartford should have known of its
protest grounds by the end of the protest period. See
Pomeroy v. Schlegel Corp., 780 F. Supp. 980 (W.D.N.Y
1991). But Pomeroy is quite distinguishable. Pomeroy
involved a defendant who was monitoring a lawsuit filed
by two of his former co-workers who were suing their
employer for securities fraud. After reading about his co-
workers’ suit, Mr. Pomeroy eventually filed his own
securities fraud suit some 15 months later. The applica-
ble statute of limitations required that the suit be brought
within one year from when Mr. Pomeroy discovered the
facts constituting the violation. The court held that Mr.
Pomeroy’s claim was barred by the statute of limitations
because he should have known about the company’s
alleged fraudulent conduct when he read about the other
lawsuit. Id. at 983. The facts between Mr. Pomeroy’s
fraud claim and the litigation involving his co-workers
were the same—they all sold their stock shares back to
the company just before a big merger announcement. The
court found that, once he read about the other lawsuit,
Mr. Pomeroy had sufficient information “to create a duty
of inquiry.” Id. at 984.
Here, Hartford’s surety bonds did not cover the same
shipments as those being investigated, so it would be
unlikely for Hartford to be following that action. In
addition, as previously discussed, the Customs indictment
was against two individuals who worked for Sunline—it
was not brought against the company by name. There-
fore, even if Hartford had established some sort of inter-
net or court monitoring system to check for Customs suits
against potential customers such as Sunline, the Shen
suit would likely still have gone unnoticed.
9 HARTFORD FIRE v. US
On the particular facts of this case, the conclusion
that Hartford knew or should have known of its protest
grounds in time to have filed a protest under 19 U.S.C. §
1514(c)(3) is not correct; the trial court erred in denying
jurisdiction on that ground.
CONCLUSION
The judgment of the United States Court of Interna-
tional Trade is reversed. The case is remanded to the
Court of International Trade for further proceedings
consistent with this opinion. 1
REVERSED AND REMANDED
1 We offer no opinion on the merits of Hartford’s
protest grounds or other causes of action against Customs
as set forth in Hartford’s amended complaint.
United States Court of Appeals
for the Federal Circuit
__________________________
HARTFORD FIRE INSURANCE COMPANY,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendants-Appellee.
__________________________
2010-1198
__________________________
Appeal from the United States Court of International
Trade in case no. 07-CV-0067, Chief Judge Donald C.
Pogue.
__________________________
LOURIE, Circuit Judge, dissenting.
Because I conclude that Hartford had sufficient in-
formation on hand to put it on notice as to any potential
claim that it may have had against Customs regarding
the “Hubei entries” within the administrative protest
period allowed under 19 U.S.C. § 1514, I respectfully
dissent. The issue here is not simply when Hartford
became aware of the basis for its claim, but rather when it
should have reasonably become aware of the claim. See
St. Paul Fire & Marine Ins. Co. v. United States, 959 F.2d
960, 964 (Fed. Cir. 1992) (a claim accrues when the ag-
grieved party “reasonably should have known” of the
existence of a claim); see also Hopland Band of Pomo
Indians v. United States, 855 F.2d 1573, 1577 (Fed. Cir.
HARTFORD FIRE v. US 2
1988) (a claim accrues when the aggrieved party “knew or
should have known” that the claim existed). The question
is whether Hartford reasonably should have known, based
upon its knowledge of the criminal proceedings, that a full
review of the proceedings could reveal information about
the nature of those proceedings, including information
that may have been relevant to the Hubei entries. I
believe the answer is clearly yes.
Hartford acted as a surety for Sunline, an importer of
frozen crawfish from China. During July and August
2003, Sunline executed eight bonds, insured by Hartford,
on entries of crawfish imported into the United States. In
November 2003, just three months after the bonds were
issued, two of Sunline’s officers, Shen and Lin, were
indicted for violating US importation laws. These indict-
ments were clearly public record. Then, in May 2005,
Hartford learned from a third party of the Shen criminal
case. It responded by taking no action on the matter for
four months, after which it sought additional information
on the Shen case. Hartford then found it reasonable to
probe further into the criminal indictment of one of the
officers of an importer for which it was acting as a surety.
Hartford argues, however, and the majority agrees,
that it was not unreasonable to wait for four months to do
so. I respectfully disagree. It appears that the importer
had only two employees here in the United States. Oral
Arg. at 16:00-23, available at
http://www.cafc.uscourts.gov/oral-argument-
recordings/2010-1198/all. They were both indicted, not for
some unrelated crimes, but for violating US importation
laws, i.e., falsely documenting imports of crawfish from
China—the same product imported from the same country
as the entries at issue here. On learning that informa-
tion, no reasonable surety who insures identical imports
3 HARTFORD FIRE v. US
by the exact same importer would wait several months
before taking any action.
Likewise, Hartford took no action following Customs’
demand on June 22, 2005 for Hartford to pay duties owed
on the Hubei entries. A reasonable surety, faced with an
obligation to pay, would have taken some action. Hart-
ford simply let the protest period pass without paying or
protesting the demand. If anything, Hartford’s non-
payment on the entries it insured indicates that it was
aware of problems at Sunline. After all, it had made
Freedom of Information Act (“FOIA”) requests on other
Sunline imports well before Customs made its demand.
Yet, the majority passes over those facts to conclude that
a duty to investigate was not triggered during the entire
protest period either. One question that neither Hartford
nor the majority is able to answer is what actually moti-
vated Hartford to conduct the Shen case investigation
four months later, even though none of the relevant
circumstances had changed and no additional information
had become available to Hartford. The only reasonable
explanation is Hartford’s lack of diligence earlier.
The majority relies on our decision in St. Paul to de-
cide that Hartford’s claim did not accrue until it actually
made a further investigation into the Shen case file and,
as a matter of fact, found nothing specific to the Hubei
entries. In St. Paul, however, the appellant became
aware of its contract defenses only after Customs dis-
closed a relevant Customs’ internal investigation of the
importer, and hence could not have been reasonably
expected to know of its claim and therefore protest any
earlier. 959 F.2d at 963-64. The facts here are very
different. Sunline’s officers were criminally indicted,
publicly, and Hartford was directly informed about the
charges by a third party. Hartford “should have reasona-
bly known” of any claim that it had back in May 2005; it
HARTFORD FIRE v. US 4
was simply negligent in taking any action on the knowl-
edge. The Court of International Trade was therefore
correct in holding that the information that Hartford
received was sufficient to trigger a reasonable surety to
action and that Hartford should have exercised more
diligence in the matter once it learned of the indictments.
By finding jurisdiction under 28 U.S.C. § 1581(i), the
majority excuses Hartford’s failure to act in a reasonably
prompt manner and thereby grants Hartford a second bite
at the apple that it does not deserve. In doing so, it
inadvisedly expands the scope of section 1581(i) to allow
claims that could and should be brought under section
1581(a). St. Paul, 959 F.2d at 963 (“[I]f a suit could be
maintained on a protestable decision under both sections
1581(a) and 1581(i), a party could circumvent the time
requirements associated with a protestable decision and
completely evade the administrative review process.”). I
therefore respectfully dissent. I would affirm the lower
court’s well-reasoned decision finding no jurisdiction in
this case.