Aegis Security Insurance v. Fleming

Slip Op. 08-142

UNITED STATES COURT OF INTERNATIONAL TRADE

____________________________________
:
AEGIS SECURITY INSURANCE :
COMPANY, :
:
Third-Party Plaintiff, :
: Before: Jane A. Restani, Chief Judge
v. :
: Court No. 05-00276
MATTHEW FLEMING and MAINLAND, :
INC., :
:
Third-Party Defendants. :
____________________________________:

OPINION

[Third-party plaintiff’s motion for summary judgment denied. Third-party defendant’s
cross-motion for summary judgment denied.]

Dated: December 23, 2008

Sandler Travis Rosenberg Glad & Ferguson, PC (Thomas R. Ferguson) and Sandler,
Travis & Rosenberg, PA (Arthur K. Purcell) for the third-party plaintiff.

Galvin & Mlawski (John J. Galvin) for the third-party defendants.

Restani, Chief Judge: This matter is before the court on cross-motions for

summary judgment by third-party plaintiff Aegis Security Insurance Company (“Aegis”) and

third-party defendant Matthew Fleming.1 Aegis seeks reimbursement for monies that it paid the

United States (“Government”), pursuant to a surety bond that it issued to third-party defendant

Mainland, Inc., to secure its obligations for antidumping duties on pencils imported from the

People’s Republic of China. The issue presented is whether Fleming may be held personally

1
Fleming’s “Cross-Motion for Dismissal” is essentially one for summary judgment.
Court No. 05-00276 Page 2

liable for Mainland, Inc.’s failure to pay antidumping duties. For the following reasons, the

court will deny both motions for summary judgment.

FACTS

These facts are undisputed. In March 1999, Aegis issued a $50,000 continuous

surety bond to Mainland, Inc. as principal covering entries for various periods of pencils from

the People’s Republic of China. (Br. in Supp. of Aegis’ Mot. for Summ. J. (“Aegis’ Mot. for

Summ. J.”) 2; Customs Bond, Gov’t’s First Am. Compl., Ex. A.) In May 2002, the Government

began investigating entries of Chinese pencils made by Mainland, Inc., and it subsequently

discovered that between March 25, 2000, and December 30, 2002, Mainland, Inc. had been

importing pencils under entry documents that contained an incorrect entry code, failed to

reference the relevant antidumping duty order, and were unaccompanied by payment of

antidumping duties. (Gov’t’s Mem. in Supp. of its Mot. for Summ. J. (“Gov’t’s Mot. for Summ.

J.”) 7–9.) After the investigation, the Government demanded that Mainland, Inc. pay

$104,625.03 in duties. (Aegis’ Statement of Material Facts for Which There is No Genuine

Issue to be Tried (“Aegis’ Rule 56(h) Statement”) ¶ 13; Fleming’s Rule 56(h)(2) Resp. to Aegis’

Statement of Material Facts for Which There is No Genuine Issue to be Tried (“Fleming’s Rule

56(h)(2) Resp.”) ¶ 13.) In March 2005, as a result of Mainland, Inc.’s failure to respond to the

Government’s demands for payment, the Government commenced the underlying action against

Aegis, pursuant to the surety bond, to recover the duties. (Gov’t’s Compl.; Gov’t’s First Am.

Compl.) In November 2005, Aegis commenced this third-party action against Mainland, Inc.,

seeking indemnification. (Aegis’ Answer & Third-Party Claim 4–8.) In June 2006, Aegis added

Fleming as a third-party defendant, alleging that Fleming and Mainland, Inc. were agents of each
Court No. 05-00276 Page 3

other and that “there [was] such unity of interest between [them] that [their] separate

personalities . . . no longer exist.” (Aegis’ Answer & Am. Third-Party Claim 5.) Fleming

appeared and answered in his individual capacity, and the court entered default against

Mainland, Inc. (Fleming’s Answer to Am. Third-Party Claim; Entry of Default, Apr. 3, 2007.)

In September 2007, Aegis and the Government settled the underlying action, and

Aegis paid the Government $56,410.61 in full satisfaction of its obligations to the Government.2

(Aegis’ Rule 56(h) Statement ¶ 21; Fleming’s Rule 56(h)(2) Resp. ¶ 21; Settlement Agreement,

Aegis’ Answer & Second Am. Third-Party Claim (“Aegis’ Third-Party Claim”), Ex. A.) In

November 2007, Aegis amended its third-party complaint against Fleming to add a claim for

equitable subrogation, alleging liability under 19 U.S.C. § 1592 based on fraud. (Aegis’

Third-Party Claim 3–9.) In his answer, Fleming asserted that he was insulated from personal

liability for Mainland, Inc.’s acts because he did not employ the company to mislead or defraud

creditors. (Fleming’s Answer to Second Am. Third-Party Claim (“Fleming’s Answer”) 7.)3

During discovery, in response to Aegis’ request for the corporate documents of

Mainland, Inc., Fleming produced documents bearing the name “Mainland Enterprises, Inc.”

(Aegis’ Reply to Fleming’s Resp. & Opp’n to Aegis’ Mot. for an Order to Show Cause Re:

2
Because of bond limitations, the Government had sought to recover $89,393.07 of the
debt from Aegis. (Gov’t’s Mot. for Summ. J. 10.)
3
Fleming also asserted that the court did not have jurisdiction over the third-party action
based on Aegis’ error in naming “Aegis Insurance Company” rather than “Aegis Security
Insurance Company” as the third-party plaintiff in the caption of the complaint. (Fleming’s
Answer 6.) This naming error is likely of no moment and, in any case, Fleming appears to have
abandoned this argument, as he correctly named “Aegis Security Insurance Company” as the
third-party plaintiff in his answer. (See id. at 1.)
Court No. 05-00276 Page 4

Contempt, & for Sanctions 3–4.) According to Aegis, this created the impression that there were

two separate entities at issue. (See id. at 4.) Pursuant to requests to clarify the relationship

between the two entities, Fleming disclosed that “Mainland, Inc.” was in fact a non-existent

entity and merely a short-hand reference to the formal corporate name “Mainland Enterprises,

Inc.” (Aegis’ Mot. for Summ. J. 11; Fleming’s Supplemental Resp. to Aegis’ Interrogs. & Reqs.

for Produc. 4, Aegis’ Mot. for Summ J., Ex. 6.) Based on this discovery and other documentary

evidence, Aegis now moves for summary judgment, claiming that Fleming used the corporation

for improper purposes and urging the court to pierce the corporate veil to hold him personally

liable under its indemnification cause of action. (Aegis’ Mot. for Summ. J. 8–19.) Aegis also

argues that even if the corporate veil may not be pierced, Fleming is still personally liable under

the subrogation cause of action because, after having paid the Government in satisfaction of the

underlying action, Aegis now steps into the shoes of the Government, which could have

recovered antidumping duties from Fleming under 19 U.S.C. § 1592. (Id. at 19–21.) Fleming

cross-moves for summary judgment, maintaining that he may not be held personally liable under

either theory. (Mem. in Supp. of Fleming’s Opp’n to Aegis’ Mot. for Summ. J. & in Supp. of

Fleming’s Cross-Mot. for Dismissal (“Fleming’s Opp’n to Mot. for Summ. J. & Cross-Mot. for

Summ. J.”) 4–11; Fleming’s Reply to Aegis’ Resp. in Opp’n to Fleming’s Cross-Mot. for Summ.

J. 1–8.)

JURISDICTION & STANDARD OF REVIEW

The court has jurisdiction over this matter under 28 U.S.C. § 1583 (covering

third-party actions in suits by the United States “to recover upon a bond or customs duties”).

Summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and
Court No. 05-00276 Page 5

admissions on file, together with the affidavits, if any, show that there is no genuine issue as to

any material fact and that the moving party is entitled to a judgment as a matter of law.”

USCIT R. 56(c); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The party seeking

summary judgment bears the initial burden of demonstrating the absence of a genuine issue of

material fact as to an essential element of the nonmoving party’s claim. Celotex, 477 U.S. at

323. Upon such showing, the burden shifts to the nonmoving party to establish the existence of

a genuine issue of material fact. See USCIT R. 56(e); see also Matsushita Elec. Indus. Co. v.

Zenith Radio Corp., 475 U.S. 574, 586–87 (1986). The inquiry is whether there is any evidence

upon which a fact-finder can properly proceed to render a verdict for the nonmoving party. See

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). The court views the facts and any

inferences in the light most favorable to the nonmoving party. See Matsushita, 475 U.S. at 587.

DISCUSSION

I. Piercing the Corporate Veil

Aegis argues that “[t]he corporate form of ‘Mainland’ should be disregarded”

because “Fleming, the sole shareholder of Mainland, is, in effect, the ‘alter ego’ of Mainland,

and Fleming’s actions justify piercing the corporate veil of Mainland under applicable law.”

(Aegis’ Mot. for Summ. J. 8.) Fleming responds that under Florida law, “he cannot be sued in

this action since Aegis has failed to prove that he formed or used Mainland for some illegal,

fraudulent or other unjust purpose.” (Fleming’s Opp’n to Mot. for Summ. J. & Cross-Mot. for

Summ. J. 1.)

Under USCIT Rule 17(b), “[t]he capacity of an individual . . . to sue or be sued

shall be determined by the law of the individual’s domicile.” USCIT R. 17(b). Fleming is
Court No. 05-00276 Page 6

domiciled in Florida. (Aegis’ Rule 56(h) Statement ¶ 8; Fleming’s Rule 56(h)(2) Resp. ¶ 8.) In

Florida, a corporation is “a legal entity that can do business in its own right and on its own credit

as distinguished from the credit and assets of its individual stockholders.” Advertects, Inc. v.

Sawyer Indus., 84 So. 2d 21, 23 (Fla. 1955). Nonetheless, Florida courts

will look through the screen of corporate entity to the individuals who compose
it in cases in which the corporation was a mere device or sham to accomplish
some ulterior purpose, or is a mere instrumentality or agent of another corporation
or individual owning all or most of its stock, or where the purpose is to evade
some statute or to accomplish some fraud or illegal purpose, or where the
corporation was employed by the stockholders for fraudulent or misleading
purposes, was organized or used to mislead creditors or to perpetrate a fraud upon
them, or to evade existing personal liability.

Tiernan v. Sheldon, 191 So. 2d 87, 89 (Fla. Dist. Ct. App. 1966) (citing Advertects, 84 So. 2d at

23; Riley v. Fatt, 47 So. 2d 769, 773 (Fla. 1950); Bellaire Sec. Corp. v. Brown, 168 So. 625, 633

(Fla. 1936); Mayer v. Eastwood-Smith & Co., 164 So. 684, 687 (Fla. 1935)). Despite this

seemingly broad basis for piercing the corporate veil, as a matter of law and equity, Florida

courts may pierce the corporate veil to hold shareholders personally liable where it is shown that

the corporation is the alter ego of the shareholders and that the shareholders engaged in improper

conduct. See generally Dania Jai-Alai Palace, Inc. v. Sykes, 450 So. 2d 1114, 1116–21 (Fla.

1984); see also Steinhardt v. Banks, 511 So. 2d 336, 339 (Fla. Dist. Ct. App. 1987) (“Eliminating

the ambiguous provision ‘or is a mere instrumentality or agent of another corporation or

individual owning all or most of its stock’ from the Tiernan opinion leaves a workable formula

for applying the Sykes reference to ‘improper conduct.’”).

Here, in support of its alter ego theory, Aegis asserts that Fleming, “the sole

manager, owner, and shareholder of [Mainland, Inc.]/[Mainland Enterprises, Inc.], completely
Court No. 05-00276 Page 7

dominated and controlled the company and its import operations.” (Aegis’ Mot. for Summ. J.

10.) Fleming admits that he is the sole shareholder and manager of the company and that he was

the only one in the company responsible for “ordering, purchasing, importing, entering, and

paying duties on Chinese pencils during all relevant periods.” (Aegis’ Rule 56(h) Statement ¶¶

7, 12; Fleming’s Rule 56(h)(2) Resp. ¶¶ 7, 12; Aegis’ Rule 56(h)(2) Resp. 4.) It is undisputed

that Fleming failed to observe corporate formalities, specifically by failing to timely create and

properly maintain corporate documents, loaning the company money, and failing to file the

fictitious name “Mainland, Inc.” in Florida. (Aegis’ Rule 56(h) Statement ¶¶ 14–17; Fleming’s

Rule 56(h)(2) Resp. ¶¶ 14–17.) Aegis, however, acknowledges that “the mere failure of a

closely held corporation to follow its corporate forms is not ‘by itself’ a ground for basing

individual shareholder liability,” but it argues that “when that failure is shown to be part of an

intentional scheme to evade responsibility for customs duties, . . . such liability ought to attach.”

(Aegis’ Br. in Opp’n to Fleming’s Cross-Mot. for Summ. J. & Reply to Fleming’s Opp’n to

Aegis’ Mot. for Summ. J. (“Aegis’ Opp’n to Cross-Mot. for Summ. J. & Reply to Opp’n to Mot.

for Summ. J.”) 11.) Aegis does not allege that Fleming organized Mainland, Inc. for an illegal or

unjust purpose, but rather that he later used the company “for the unjust purpose of misleading

[U.S. Customs and Border Protection (“Customs”)] (a creditor) and/or the surety and avoiding

the payment of lawfully assessed antidumping duties, for which Aegis’ [sic] was jointly an [sic]

severally liable.” (Aegis’ Mot. for Summ. J. 9.) Specifically, Aegis contends that before March

25, 2000, Fleming consistently filed entries for pencils from China in accordance with the

antidumping order and paid antidumping duties under the names “Matthew Fleming DBA

Mainland” or “Mainland, Inc.,” and at times using his personal social security number, but that
Court No. 05-00276 Page 8

beginning in 2000, “Fleming suddenly and knowingly decided to begin entering pencils from

China under cover of the ‘formal’ corporate name of Mainland Enterprises Inc.” (Id. at 13.)

According to Aegis, this “abrupt decision to begin using the registered corporate name coincided

with Fleming’s purposeful decision not to enter the goods under the AD Order and to stop

paying antidumping duties on similar entries of pencils from China.” (Id. at 13–14.) In support

of its claim of purposeful conduct, Aegis asserts that Fleming was an experienced importer of

Chinese pencils who has an MBA degree and that Fleming had been importing Chinese pencils

even prior to his company’s incorporation and during a period when Chinese pencils were

subject to the antidumping duty order. (Id. at 14.) Aegis also contends that the Government had

demanded, and Fleming had paid, antidumping duties on an entry for November 2000, and not

just on entries for an earlier period. (Aegis’ Opp’n to Cross-Mot for Summ. J. & Reply to Opp’n

to Mot. for Summ. J. 4; Gov’t’s Mot. for Summ. J. 8–9.) Thus, Aegis argues Fleming was fully

aware of his payment obligation as to the entries at issue.

Fleming contends that he did not try to mislead Aegis or the Government by using

several corporate names. He claims that he never hid the fact that “Mainland, Inc.” and

“Mainland Enterprises, Inc.” were the same entity, pointing out that the surety bond and

documents submitted early in discovery show that the two entities share the same employer

identification number (“EIN”). (Fleming’s Opp’n to Mot. for Summ. J. & Cross-Mot. for Summ.

J. 2.) Fleming also explained that he used his personal social security number only before

Mainland Enterprises, Inc.’s incorporation, which occurred in June 1997, and while he was

waiting for its EIN and importer identification number. (Id. at 3; Aegis’ Rule 56(h) Statement

¶ 5; Fleming’s Rule 56(h)(2) Resp. ¶ 5.) He further claims that various customs brokers began
Court No. 05-00276 Page 9

entering pencils under the EIN in January 1998, but that a certain customs broker mistakenly

used his social security number in three July 1998 entries. (Fleming’s Opp’n to Mot. for Summ.

J. & Cross-Mot. for Summ. J. 3.) He also attributed any inconsistencies in the entry documents

to his use of different customs brokers and difficulty in classifying pencils. (Id. at 4–5;

Fleming’s Reply to Aegis’ Resp. in Opp’n to Fleming’s Cross-Mot. for Summ. J. 8.)

Fleming, whose company seems to be focused on pencils, admits that he is an

experienced importer of Chinese pencils and does not deny that he was aware of the antidumping

duty order. (Aegis’ Rule 56(b) Statement ¶ 12; Fleming’s Rule 56(h)(2) Resp. ¶ 12.) During his

deposition, Fleming admitted that between 1997 and 1999 he declared antidumping duties,

which were at deposit rates of zero, 8.6 or 53.65 percent (Fleming Dep., Aegis’ Mot. for Summ.

J. Ex. 2 (“Fleming Dep”) 58:12–68:6, Sept. 26, 2007), but he implies that he did not act

knowingly because declarations need not have been made if the entries at issue had had a zero

percent rate (id. at 61:16–21, 68:7–13, 71:18–72:3.) Fleming also testified that from 1997

through 1999, in paying his broker bills, he did not “study closely every document” because he

“had an assembly operation for pencils and it was a small . . . corporation, and [he] handled a lot

of things.” (Id. at. 73:10–14.) He admitted that he paid antidumping duties from 1997 through

1999, but stated that he did not analyze all the numbers on the invoices, as the numerous

percentages on the documents confused him. (Id. at 73:24–74:4, 78:8–12.) He stated that the

antidumping duty issue was “a very confusing issue” also because “[t]here were several

companies [meaning producers or exporters] with different rates, . . . and the duty rates changed

every year.” (Id. at 74:16–19.) He admitted that he was the only one in his company deciding

whether to pay or challenge antidumping duties, but claimed that he relied upon the customs
Court No. 05-00276 Page 10

brokers to submit the entries. (Id. at 79:7–13.)

Here, Aegis met its burden of defeating Fleming’s cross-motion for summary

judgment. It showed that the company is a small entity focused on pencils from China and that

Fleming controlled and dominated its operations. Aegis also showed that Fleming failed to

adhere to corporate formalities. Aegis further demonstrated that Fleming, an experienced

importer of Chinese pencils, knew about the antidumping duty order on Chinese pencils,

controlled payments and protests of duties, and had paid the antidumping duties on previous

entries, and on at least one during the relevant period, yet failed to assure they were declared in

the entry documents at issue. Aegis points to documents first submitted to the court via an

affidavit submitted with the Government’s motion for summary judgment in the underlying

action to support its position that Fleming used various corporate names and entities to avoid

personal liability for antidumping duties. (See Aegis’ Mot. for Summ. J. 13.) While an

inference of improper conduct sufficient to establish liability might be drawn from the totality of

evidence, Aegis does not succeed in eliminating material factual disputes with respect to its own

summary judgment motion.

First, the documentary evidence is consistent with Fleming’s explanation that

“Mainland, Inc.” is merely a short-hand reference for “Mainland Enterprises, Inc.,” as it shows

that “Mainland, Inc.” and “Mainland Enterprises, Inc.” share the same address, EIN, and

importer identification number.4 (See Confidential App. to Gov’t’s Mem. in Supp. of its Mot.

for Summ. J. (“Confidential App.”), Attachs. H & I.) Second, the inconsistent use of “Mainland,

4
A corporation’s assigned EIN and importer identification number are the same. See 19
C.F.R. § 24.5.
Court No. 05-00276 Page 11

Inc.” and “Mainland Enterprises, Inc.” in the entry documents can be traced to Fleming’s use of

different customs brokers. (See id.) The sudden use of “Mainland Enterprises, Inc.” and a

different entry code in the March 25, 2000, entry document coincides with the use of a new

broker. (Compare id., Attach. I, with id., Attach. H, Tab 1.) Contrary to Fleming’s claim,

however, the record appears to indicate that pencils were first entered under the EIN in April

1999, and that the EIN has been consistently used since then, regardless of whether Mainland,

Inc. or Mainland Enterprises, Inc. was named as the importer of record. (See id., Attachs. H &

I.) Thus, the switch to corporate form in some way roughly coincides with the antidumping duty

payment problems.

The issue here is Fleming’s intent, a fact that is very difficult to establish on

summary judgment. Fleming, in his deposition testimony, raises a genuine issue of material fact

as to whether he engaged in fraudulent conduct. In particular, the testimony shows that although

he was aware of the antidumping duty order, he implies that he should be excused because

declaring antidumping duties would not be necessary if the duty rate were zero. (Yet, the

antidumping duty rates for the entries at issue were not zero.) Further, Fleming testified that the

invoices submitted by his brokers were confusing, as they contained many numbers, and that he

was unable to scrutinize every document. His testimony is that he relied on the brokers in

submitting the documents. Based on this evidence, a fact-finder could conclude that Fleming

had no intent to mislead or defraud the Government. Accordingly, the material fact of Fleming’s

intent remains for trial.

II. Subrogation to a 19 U.S.C. § 1592 Claim

Aegis argues that even if the corporate veil could not be pierced, “[u]nder
Court No. 05-00276 Page 12

established principles of subrogation, . . . having paid duties to the United States pursuant to 19

U.S.C. § 1592(d), under the [surety] bond, [it] stepped into the shoes of the Government and

became entitled to pursue the United States’ section 1592(d) claim against Fleming.” (Aegis’

Opp’n to Cross-Mot. for Summ. J. & Reply to Opp’n to Mot. for Summ. J. 7.) Aegis asserts that

“[b]ecause the United States (as creditor) had the right to sue Fleming as an individual ‘person’

for violating 19 U.S.C. § 1592(a) and could collect duties against him under § 1592(d),” Aegis

could recover against Fleming personally once it became subrogated to the Government’s claim.

(Aegis’ Mot. for Summ. J. 19.) Fleming argues that he is not subject to liability under § 1592

because he was not the importer of record. (Fleming’s Reply to Aegis’ Resp. in Opp’n to

Fleming’s Cross-Mot. for Summ. J. 3.)

Under the doctrine of equitable subrogation, “a surety who pays the debt of

another is entitled to all the rights of the person he paid to enforce his right to be reimbursed.”

Pearlman v. Reliance Ins. Co., 371 U.S. 132, 137 (1962). The rights to which the surety is

entitled, however, are no greater than those of the party for whom the surety is substituted.

United States v. California, 507 U.S. 746, 756 (1993) (“The subrogee, who has all the rights of

the subrogor, usually ‘cannot acquire by subrogation what another whose rights he claims did

not have.’”) (quoting United States v. Munsey Trust Co., 332 U.S. 234, 242 (1947)). Thus, the

surety takes the rights subject to the limitations incident to them while in the hands of the party

to whom the surety is subrogated, including limitations under statutes of limitations. See id.

(“Here [the subrogor’s] rights have lapsed and its claims are barred. Under traditional

subrogation principles then, the claims of the [subrogee] also would be barred.”).
Court No. 05-00276 Page 13

Section 1592(a) states:

Without regard to whether the United States is or may be deprived of all or a
portion of any lawful duty, tax, or fee thereby, no person, by fraud, gross
negligence, or negligence--

(A) may enter, introduce, or attempt to enter or introduce any merchandise into
the commerce of the United States by means of--

(i) any document or electronically transmitted data or information, written or oral
statement, or act which is material and false, or

(ii) any omission which is material, or

(B) may aid and abet any other person to violate subparagraph (A).

19 U.S.C. § 1592(a)(1). Aegis alleges that “Fleming is a ‘person’ within the meaning of

[§ 1592(a)], who by means of fraud, knowingly entered and introduced merchandise into the

commerce of the United States by means of documents which were material and false and/or by

material omissions.” (Aegis’ Third-Party Claim 9.) Under the facts of the case, however, absent

piercing of the corporate veil, Fleming may not be liable under this theory because he was not

the one who directly entered or introduced merchandise into commerce. Rather, the corporation

was the importer of record, which utilized customs brokers to file entry documents on its behalf.

Nonetheless, Fleming may still be liable for violation of § 1592(a) if he aided and abetted the

corporation to violate the statute.5 To be liable under this theory, however, Fleming’s conduct

must rise to the level of fraud. See United States v. Action Products Int’l, Inc., 25 CIT 139, 144

5
The second amended third-party complaint alleges liability under § 1592(a) based on
fraud. (Aegis’ Third-Party Claim 9.) Section 1592(a)(1)(B) covers aiding and abetting. Thus,
the complaint would seem broad enough to cover this theory of liability. Using criminal law as
an analogy, charging of the substantive offense includes aiding and abetting, whether specifically
charged or not. See United States v. Dunne, 324 F.3d 1158, 1163 (10th Cir. 2003).
Court No. 05-00276 Page 14

(2001) (stating that one cannot be held liable for negligent aiding and abetting because “a claim

of aiding and abetting requires knowledge or intent on the part of the offender”) (quoting United

States v. Hitachi Am., Ltd., 172 F.3d 1319, 1338 (Fed. Cir. 1999)). As discussed in Part I,

based on the evidence presented to the court in the summary judgment papers, a triable issue of

fact exists as to whether Fleming intended to defraud the Government.

Fleming also argues that Aegis may not recover against him under § 1592 because

the claim against him under § 1592 is time-barred. (Fleming’s Reply to Aegis’ Resp. in Opp’n

to Fleming’s Cross-Mot. for Summ. J. 4.) Assuming the statute of limitations is a good defense,

it would not appear to bar the entire claim even under the earliest possible date of

commencement.6 Further, neither party addressed the statute of limitations in their pleadings or

initial briefs on their cross-motions for summary judgment. Rather, Fleming did not raise this

defense until his reply brief in support of his cross-motion for summary judgment and, therefore,

Aegis did not have an opportunity to address it at all. While the statute of limitations defense

likely is waived, the parties may address this issue further in their pre-trial filings. See USCIT

R. 8(d) (stating that parties must set forth affirmative defense of statute of limitations in

pleadings); see also 5 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure §

6
An action to recover duties under § 1592(d) must be “commenced within five years
after the time when the alleged offense was discovered,” and an action alleging violation of
§ 1592 must be “commenced within 5 years after the date of the alleged violation or, if such
violation arises out of fraud, within 5 years after the date of discovery of fraud.” 19 U.S.C.
§ 1621. Here, the earliest violation of § 1592 occurred on March 25, 2000, the Government
discovered the violations at the earliest in May 2002, and the latest violation occurred on
December 30, 2002. Aegis asserted its indemnification claim against Fleming on June 2, 2006
and its claim for equitable subrogation against Fleming on November 29, 2007. (Aegis’ Answer
& Am. Third-Party Claim 9; Aegis’ Third-Party Claim 10.)
Court No. 05-00276 Page 15

1278 (3d ed. 2004) (noting that “failure to plead an affirmative defense . . . results in the waiver

of that defense and its exclusion from the case”); 2 Moore’s Federal Practice § 8.08[1][6]

(Matthew Bender 3d ed.) (noting that “affirmative defense that an action is barred by a statute of

limitations must be pleaded in a response pleading”).

CONCLUSION

Because the existence of a genuine issue of material fact as to Fleming’s state of

mind precludes the court from resolving this case on the motions before it, summary judgment is

not granted to either party. Accordingly, the court will DENY Aegis’ motion for summary

judgment and DENY Fleming’s cross-motion for summary judgment.

The parties shall submit within 30 days a schedule for submission of pre-trial

filings and a date for trial to be scheduled no later than April 30, 2009.

/s/ Jane A. Restani
Jane A. Restani
Chief Judge

Dated this 23rd day of December, 2008.
New York, New York.