Slip Op. 09-142
UNITED STATES COURT OF INTERNATIONAL TRADE
HARTFORD FIRE INSURANCE COMPANY,
Plaintiff,
Before: Pogue, Judge
– v –
Court No. 07-00067
UNITED STATES,
Defendant.
OPINION
[Defendant’s motion to dismiss for lack of subject matter
jurisdiction granted.]
Dated: December 16, 2009
Barnes, Richardson & Colburn (Frederic D. Van Arnam, Jr., Daniel
F. Shapiro, and Eric W. Lander) for the Plaintiff.
Tony West, Assistant Attorney General; Jeanne E. Davidson,
Director, Franklin E. White, Jr., Assistant Director, Commercial
Litigation Branch, Civil Division, U.S. Department of Justice,
(Michael J. Dierberg); and Beth C. Brotman, Office of Assistant
Chief Counsel, U.S. Customs and Border Protection, Of Counsel,
for the Defendant.
Pogue, Judge: In response to a demand by the United States
Bureau of Customs and Border Protection (“Customs”) for the
payment of antidumping duties secured by Plaintiff Hartford Fire
Insurance Company’s (“Plaintiff” or “Hartford”) bonds, Plaintiff
brings this action, asking the court to declare its bonds
unenforceable. Pursuant to USCIT R. 12(b)(1), Defendant moves to
dismiss, claiming a lack of subject matter jurisdiction because
of Plaintiff’s failure to utilize or exhaust its administrative
Court No. 07-00067 Page 2
protest remedies. For the reasons stated herein, the court
grants Defendant’s motion.
BACKGROUND
Customs’ demand sought payment under eight single entry
bonds issued by Hartford to secure entries of frozen cooked
crawfish tail meat from the People’s Republic of China (the
“Hubei entries”). The Hubei entries were imported into the
United States between July 30, 2003 and August 31, 2003 by
Sunline Business Solution Corporation (“Sunline”). (See Am.
Compl. ¶¶ 2, 8-9, 13; Pl.’s Resp. in Opp’n to Def.’s Mot. to
Dismiss (“Pl.’s Resp.”) 1-2.)
The Hubei entries were liquidated in July 2004 and March
2005 at an antidumping duty rate of 223%, following an
antidumping administrative review. (Am. Compl. ¶¶ 10-12.)
Sunline has made no payment of these antidumping duties, and on
June 22, 2005, Customs made a demand on Hartford for, inter alia,
the value of the eight bonds Plaintiff issued to secure payment
of duties on the Hubei entries. (Id. ¶ 13; Pl.’s Resp. 2.)
Prior to Customs’ demand, Hartford was informed, on May 6,
2005, by an outside source, that certain Sunline personnel had
been arrested for filing false invoices with Customs. (Aff. of
Daniel F. Shapiro, Esq. in Supp. of Pl.’s Resp. in Opp’n to
Def.’s Mot. to Dismiss (“Shapiro Aff.”) ¶ 4; Pl.’s Resp. 2.) See
United States v. Shen, No. 03-CR-1208 (C.D. Cal. Nov. 25, 2003)
Court No. 07-00067 Page 3
(cited in Shapiro Aff. ¶ 7). Nonetheless, Hartford did not file
a timely protest, pursuant to Section 514 of the Tariff Act of
1930, as amended, 19 U.S.C. § 1514 (2006),1 regarding the June
22, 2005 demand for payment.
Accordingly, on September 20, 2005, the time period for
protesting Customs’ June 22, 2005 demand against Hartford with
respect to the Hubei entries expired. (Pl.’s Resp. 8; Def.’s
Reply Br. in Supp. of its Mot. to Dismiss (“Def.’s Reply”) 3.)
See also 19 U.S.C. § 1514(c)(3) (2000) (amended 2004) (“A protest
by a surety which has an unsatisfied legal claim under its bond
may be filed within 90 days from the date of mailing of notice of
demand for payment against its bond.”).2
Plaintiff alleges that, rather than initiating a protest, on
October 7, 2005, Plaintiff requested a copy of the court case
file for Shen, No. 03-CR-1208, from the United States District
Court for the Central District of California. (Shapiro Aff. ¶ 7.)
1
Unless otherwise noted, further citation to the Tariff Act
of 1930 is to Title 19 of the U.S. Code, 2006 edition. In
relevant part, 19 U.S.C. § 1514(a) provides that “decisions of
the Customs Service . . . as to . . . charges or exactions . . .
shall be final and conclusive upon all persons . . . unless a
protest is filed in accordance with this section . . . .”
2
Subsection 1514(c)(3) was amended in 2004 to extend the
protest filing period to 180 days from the date of mailing of
notice of demand for payment, Pub. L. 108-429, § 2103(2)(B)(iii),
118 Stat. 2598; however, this amendment applies solely to entries
made on or after the fifteenth day after December 3, 2004, see
id. at § 2108, and is therefore not applicable here.
Court No. 07-00067 Page 4
On October 14, 2005, Plaintiff received a copy of this case file.
(Id. ¶ 9.) The file was complete, with the exception of pages 1-
38 of the “April 2004 Reporter’s Transcript of Proceedings,”
which were received by Plaintiff on November 22, 2005. (Id.) As
a result of reviewing the Shen case file, sometime between
October 14, 2005 and November 2, 2005 Plaintiff ascertained that
1) on June 19, 2003, Customs had been informed by letter from
Shanghai Taoen International Trading Co. (“STI letter”) of the
illegal importation of crawfish tail meat into the United States
from China; and 2) that Customs had released to Sunline
approximately $270,256 in cash deposits posted to secure other
entries of crawfish tail meat from China. (See Shapiro Aff.
¶¶ 10-13.)
Plaintiff filed suit in this Court on February 26, 2007. In
its amended complaint, Plaintiff alleges 1) that Customs’ failure
to disclose to Hartford the fact of Sunline’s investigation for
illegal importation of crawfish tail meat prior to Hartford’s
issuance of bonds securing the Hubei entries “materially
increased Hartford’s risk . . . beyond that level of risk which
Hartford intended to assume on those bonds” (Am. Compl. ¶¶ 34-
35), thereby constituting a material misrepresentation fatal to
the formation of an enforceable bond agreement (id. ¶¶ 41-42);
2) that, “[b]ased on its investigations, Customs knew or should
have known that Sunline had induced Hartford to issue the bonds
Court No. 07-00067 Page 5
covering the Hubei entries through fraud or material
misrepresentations” (id. ¶ 47), and that, as a result, “Customs
did not, and could not, in good faith materially rely on the
bonds issued by Hartford for the Hubei entries” (id. ¶ 48);
3) that, prior to releasing to Sunline cash deposits securing
other entries of tail meat from China, Customs knew or should
have known that the Hubei entries were as yet unliquidated and
subject to an increase in dumping duties owed, and that, by
releasing this “collateral,” Customs increased Hartford’s risk,
thereby reducing Hartford’s obligation to pay by the amount thus
released (id. ¶¶ 53-62); and 4) that Hartford’s obligation to pay
should in any case be reduced by the amount of the released cash
deposits because Customs “did not act with good faith and fair
dealing when it refunded proceeds without notifying Hartford,”
denying Hartford the opportunity to seek relief under the
equitable doctrine of set-off (id. ¶¶ 64-69).
For these reasons, Plaintiff contends that its bonds
securing the Hubei entries are unenforceable as a matter of
contract and suretyship law or, in the alternative, that its
obligation to pay should be offset by the amount that was
refunded by Customs to Sunline in connection with other entries.
(See Am. Compl. ¶¶ 34-69.)
In its complaint, Plaintiff seeks to invoke the court’s
jurisdiction pursuant to 28 U.S.C. § 1581(i) (Am. Compl. ¶ 28),
Court No. 07-00067 Page 6
which grants the court exclusive residual jurisdiction over
certain civil actions against the United States not covered by
subsections 1581(a)-(h).
Defendant seeks dismissal, arguing that Hartford’s claims
could have been asserted in a timely protest and that
jurisdiction for Hartford’s challenge to Customs’ charge must
therefore be established pursuant to 28 U.S.C. § 1581(a).3 (See
Def.’s Mem. 1-2.)
STANDARD OF REVIEW
Plaintiff, as the party seeking to invoke the court’s
jurisdiction, has the burden of establishing that jurisdiction.
Cedars-Sinai Med. Ctr. v. Watkins, 11 F.3d 1573, 1583 (Fed. Cir.
1993). Where, as here, the Defendant brings a facial challenge
to dismiss for lack of subject matter jurisdiction, the factual
allegations in Plaintiff’s pleadings “are taken as true and
construed in a light most favorable to the complainant.” Id.
(citation omitted). On the other hand, Plaintiff’s “mere
recitation of a basis for jurisdiction” is not controlling;
rather, the court must determine the “true nature of the action,”
Norsk Hydro Canada, Inc. v. United States, 472 F.3d 1347, 1355
(Fed. Cir. 2006) (internal quotation marks and citation omitted),
3
In relevant part, 28 U.S.C. § 1581(a) provides that the
court “shall have exclusive jurisdiction of any civil action
commenced to contest the denial of a protest, in whole or in
part . . . .”
Court No. 07-00067 Page 7
and, where Plaintiff’s factual allegations fail to establish a
basis for subject matter jurisdiction over the true nature of
Plaintiff’s action, because Plaintiff has another adequate and
reviewable remedy which applies, the case will be dismissed. See
Hartford Fire Ins. Co. v. United States, __ CIT __, 507
F. Supp. 2d 1331 (2007) (relying on Parkdale Int’l, Ltd. v.
United States, 31 CIT 720, 491 F. Supp. 2d 1262 (2007) and
Abitibi-Consol., Inc. v. United States, 30 CIT 714, 437 F. Supp.
2d 1352 (2006)), aff’d, 544 F.3d 1289 (Fed. Cir. 2008) (“Hartford
I”).
DISCUSSION
By bringing this action, Hartford seeks to avoid payment of
Customs’ demand upon its bonds. See Hartford I, 544 F.3d at 1293.
Thus, as in Hartford I, the “true nature” of Hartford’s claim is
that it is a challenge to that charge. As in Hartford I, “[t]he
unenforceability of the bonds [Plaintiff] alleges in its
complaint is merely a theory of defense upon which Customs may
grant the relief of cancelling the charge. In other words,
despite alleging otherwise, Hartford is challenging a charge.”
Id. “[T]he proper mechanism to challenge a charge is [by] a
protest before Customs pursuant to 19 U.S.C. § 1514(a)(3),” id.,
denial of which protest may be reviewed in this Court pursuant to
28 U.S.C. § 1581(a). It follows that the exercise of
jurisdiction over Plaintiff’s case under subsection 1581(i) is
Court No. 07-00067 Page 8
precluded by Plaintiff’s failure to utilize the administrative
protest remedy available to it. See id.
Plaintiff makes two alternative arguments in support of its
claim that jurisdiction is nevertheless proper here pursuant to
28 U.S.C. § 1581(i). First, Plaintiff alleges that it learned of
the bases for its present causes of action after the period for
protesting Customs’ demand for payment on Plaintiff’s bonds for
the Hubei entries had already expired. Plaintiff argues that
because Hartford therefore could not have availed itself of the
protest remedy, jurisdiction under 1581(i) is appropriate in this
case. (See Pl.’s Resp. 5-13 (citing St. Paul Fire & Marine Ins.
Co. v. United States, 959 F.2d 960 (Fed. Cir. 1992)).)
Plaintiff’s alternate ground for 1581(i) jurisdiction
asserts that Hartford’s claim is independent of the liquidation
of the Hubei entries. Plaintiff contends that because,
regardless of the status of liquidation, these bonds would have
been subject to nullification by Hartford upon discovery of the
contractual formation flaws it now alleges, Hartford’s claim
should be conceived not as the protest of a charge that could
have been brought under 1581(a), but rather as a broader
contractual claim that properly belongs under 1581(i). (See id.
13-16 (citing Washington Int'l Ins. Co. v. United States, 18 CIT
654 (1994) (relying on Old Republic Ins. Co. v. United States, 10
CIT 589, 645 F. Supp. 943 (1986))).) The court will consider
Court No. 07-00067 Page 9
each argument in turn.
I. Late Discovery of Bases for Protest
As mentioned above, taking Plaintiff’s allegations as true
for purposes of this facial challenge to subject matter
jurisdiction, Plaintiff discovered the two pieces of information
underlying its present claims upon reviewing the Shen case file
at some point between October 14, 2005 and November 2, 2005. (See
Pl.'s Resp. 10 (“The discovery of the reference to the STI letter
is the key piece of information upon which Hartford’s first and
second causes of action hinge.”); id. at 2 (“Hartford learned of
the STI letter [] after it had requested the public portion of
the Shen court file, and found reference to it therein.”); see
also Shapiro Aff. ¶¶ 10-11; Pl.’s Resp. 11 (“Hartford’s third and
fourth causes of action[] are based on Customs[’] release of
collateral . . . associated with the Hubei entries. . . .
Hartford [] learned of [this release] after requesting, receiving
and reviewing the Shen case file.”); see also Shapiro Aff. ¶ 13.)
Because the period for protesting Customs’ demand for
payment on the bonds covering the Hubei entries expired on
September 20, 2005, Plaintiff contends that this case is
analogous to St. Paul, where the court held that when a surety
“alleges [that] it did not know of the now-asserted legal basis
for protesting the government demand within the time frame set by
the statute for a protest[,] [then] . . . the administrative
Court No. 07-00067 Page 10
procedures regarding protests [do not necessarily] bar the
assertion of a later discovered claim.” (Pl.’s Resp. 7 (quoting
St. Paul, 959 F.2d at 963-64).)
While it is true that “[n]o administrative procedure exists
to cover the unusual situation where a claim does not accrue
until after the protest period has expired,” St. Paul, 959 F.2d
at 964, it is equally true that a claim accrues when “the
aggrieved party reasonably should have known about the existence
of the claim.” Id. (emphasis added) (citing Chevron U.S.A., Inc.
v. United States, 923 F.2d 830, 834 (Fed. Cir. 1991); Hopland
Band of Pomo Indians v. United States, 855 F.2d 1573, 1577 (Fed.
Cir. 1988); Welcker v. United States, 752 F.2d 1577, 1580-81
(Fed. Cir. 1985); Braude v. United States, 585 F.2d 1049, 1051-53
(Ct. Cl. 1978); Japanese War Notes Claimants Ass’n of the
Philippines v. United States, 373 F.2d 356, 359 (Ct. Cl. 1967));
see also Mitsubishi Elecs. Am., Inc. v. United States, 44 F.3d
973, 978 (Fed. Cir. 1994) (same).
In this case, taking Plaintiff’s allegations as true,
Hartford first learned of the Shen case and its potential
relevance to Hartford’s bonds securing other Sunline entries on
or about May 6, 2005. (Pl.’s Resp. 12 n.3; Shapiro Aff. ¶ 4.)
Nevertheless, it was not until October 7, 2005 – a full four
months later – that Hartford requested a copy of the Shen case
file, which it obtained one week later. (Shapiro Aff. ¶¶ 7,9.)
Court No. 07-00067 Page 11
Because Plaintiff learned of the facts underlying all four of its
present claims from reviewing this 2003 case file (see Pl.’s
Resp. 2, 10-11; Shapiro Aff. ¶¶ 10-13), had Plaintiff requested a
copy of this file in a reasonably prompt manner, it could have
discovered the bases for all of its present claims well within
the then-90 day period for filing its protest with Customs.
Unlike St. Paul, therefore, where the plaintiff had first
filed a timely protest with Customs on other grounds and only
subsequently, during review of the denial of that protest under
subsection 1581(a), was made aware for the first time of facts
supporting a different claim, St. Paul, 959 F.2d at 961, 963-64,
Hartford reasonably should have known about the existence of its
claims within the time period allotted for filing a protest with
Customs, see, e.g., Pomeroy v. Shlegel Corp., 780 F. Supp. 980
(W.D.N.Y. 1991) (plaintiff’s claim accrued when he learned of the
existence of litigation potentially relevant to his claim, and
plaintiff failed to exercise due diligence by waiting three
months to obtain a copy of the complaint from that case).
Hartford’s failure to avail itself of the administrative
procedures available to it does not negate the effect of the
availability of those procedures. The availability of that
adequate protest remedy precludes the exercise of jurisdiction
over Plaintiff’s present case under subsection 1581(i). See id.
at 964; Hartford I, 544 F.3d at 1292-93.
Court No. 07-00067 Page 12
Accordingly, because Plaintiff’s claims are within the scope
of claims protestable before Customs pursuant to 19 U.S.C.
§ 1514(a)(3), see Hartford I, 544 F.3d at 1294, and because
Plaintiff could and should have reasonably known of the existence
of its present claims against Customs within the statutorily
prescribed time period for filing protest against Customs’
demands for payment, see, e.g., Pomeroy, 780 F. Supp. 980;
Johnston v. Standard Min. Co., 148 U.S. 360, 370 (1893) (“[T]he
plaintiff is chargeable with such knowledge as he might have
obtained upon inquiry, provided the facts already known by him
were such as to put upon a man of ordinary intelligence the duty
of inquiry.”), the court concludes that “Hartford could have
brought its claim through the protest mechanism, the denial of
which would have triggered review pursuant to subsection
1581(a),” Hartford I, 544 F.3d at 1293, and that “[i]ts failure
to do so renders subsection 1581(i) unavailable.” Id.
II. Argument that Claims are Independent of Liquidation
As noted above, Plaintiff also argues, in the alternative,
that jurisdiction over this case under subsection 1581(i) is
proper because the true nature of its claims is not the protest
of a charge demanded pursuant to liquidation of the Hubei
entries, but is rather in the nature of broader contractual
claims, which “are not of the type [that] Congress intended to
subject to the protest mechanism and section 1581(a)
Court No. 07-00067 Page 13
jurisdiction.” (Pl.’s Resp. 16.)
In support of its argument in this respect, Plaintiff relies
on Washington Int'l Ins. Co. v. United States, 18 CIT 654 (1994)
(Pl.’s Resp. 15-16), which itself relies on Old Republic Ins. Co.
v. United States, 10 CIT 589, 645 F. Supp. 943 (1986), Washington
Int’l, 18 CIT at 656. Old Republic, and accordingly Washington
Int’l, are inapposite for the same reasons as those explained in
Hartford I, __ CIT __, __, 507 F. Supp. 2d at 1336 ("In Old
Republic, the court permitted a surety’s contract challenge to
the collection of duties to proceed under section 1581(i) where
the claims could not have been made under section 1581(a)
because, despite Plaintiff’s protest and payment of the duties
involved, Customs had legitimately extended the time for
liquidation of the goods at issue. Consequently, the Old
Republic court assumed that section 1581(a) jurisdiction was not
available. Also, unlike the plaintiff in Old Republic, Plaintiff
here has failed to utilize its administrative protest remedy."
(citations omitted)).
Plaintiff has not offered any new arguments or evidence to
distinguish the present case from Hartford I, where the court
concluded that "Customs’ charge required that Plaintiff make
payment under its bond; Plaintiff objects, and thus the true
nature of its complaint is to avoid making the requested
payment," Hartford I, 507 F. Supp. 2d at 1336; see also Old
Court No. 07-00067 Page 14
Republic, 10 CIT at 598, 645 F. Supp. at 952 ("Where jurisdiction
is asserted under 1581(i), the court . . . must determine the
thrust of the complaint." (internal quotation marks and citation
omitted)). Therefore, the court concludes that Plaintiff’s
claims in this action, like its substantively similar claims in
Hartford I, are precisely the type of claims that could have been
brought in a protest with Customs,4 and hence that jurisdiction
pursuant to subsection 1581(i) is not available in this case. See
Hartford I, 507 F. Supp. 2d at 1336; 544 F.3d at 1293-95.
CONCLUSION
For all of the foregoing reasons, Defendant’s motion to
dismiss this action for lack of subject matter jurisdiction is
GRANTED, and Plaintiff’s complaint is hereby DISMISSED. Judgment
will be entered for Defendant.
It is SO ORDERED.
/s/ Donald C. Pogue
Donald C. Pogue, Judge
Dated: December 16, 2009
New York, N.Y.
4
The court notes that this case does not present the same
situation as that addressed by the Federal Circuit in United
States v. Utex Int’l Inc., 857 F.2d 1408 (Fed. Cir. 1988) (surety
not required to file protest and pay full amount of damages in
order to preserve its right to defend on issue of liability for
liquidated damages) because, unlike in Utex, the true nature of
Plaintiff’s complaint is a challenge to Customs’ charge of unpaid
duties, rather than a defense against liability pursuant to a
liquidated damages clause. See also United States v. Toshoku Am.,
Inc., 879 F.2d 815, 818 (Fed. Cir. 1989) (“An assessment of
liquidated damages is not a ‘charge or exaction’ . . . .”).