Slip Op. 10-77
UNITED STATES COURT OF INTERNATIONAL TRADE
__________________________________________
:
DELPHI PETROLEUM, INC., :
:
Plaintiff, :
:
v. : Before: Jane A. Restani, Chief Judge
:
UNITED STATES, : Court No. 06-00245
:
Defendant. :
__________________________________________:
OPINION
[Plaintiff’s motion for attorney’s fees is denied. Plaintiff’s motion for costs is granted.]
Dated: July 9, 2010
Delphi Petroleum, Inc. (Ronald Gumbaz) for the plaintiff.
Tony West, Assistant Attorney General; Jeanne E. Davidson, Director, Todd M.
Hughes, Deputy Director, Commercial Litigation Branch, Civil Division, U.S. Department of
Justice (Tara K. Hogan); Richard McManus, Office of Chief Counsel, U.S. Customs and Border
Protection, of counsel, for the defendant.
Restani, Chief Judge: This matter is before the court on the application of plaintiff
Delphi Petroleum, Inc. (“Delphi”) for an award of attorney’s fees and costs pursuant to the Equal
Access to Justice Act (“EAJA”), 28 U.S.C. § 2412. Delphi sought reliquidation of entries and
drawback of Harbor Maintenance Taxes (“HMT”) and Merchandise Processing Fees (“MPF”)
paid on certain imported petroleum products and now applies for the legal fees and costs
incurred during the course of its lawsuit against the United States.1 The United States contests
this application, arguing that its administrative actions and litigation arguments were not in bad
1
Delphi seeks $34,276.51 for attorney’s fees and $350.00 for filing costs. (Mem. in
Supp. of Pl.’s Mot. for Att’ys Fees & Costs (“Pl.’s Mot.”) 3.)
Court No. 06-00245 Page 2
faith. For the reasons stated below, the court denies Delphi’s motion for attorney’s fees and
grants Delphi’s motion for costs.
BACKGROUND
The facts of this case were well documented in the previous opinion. See Delphi
Petroleum, Inc. v. United States, 662 F. Supp. 2d 1348 (CIT 2009). The court presumes
familiarity with that decision, but briefly summarizes the facts relevant to this motion.
Between 1998 and 2002, Delphi filed five drawback entries on certain petroleum
products it imported and then exported as acceptable substitute finished petroleum derivatives
pursuant to 19 U.S.C. § 1313(p).2 Delphi, 662 F. Supp. 2d at 1349. In the context of conflicting
and even prohibitory regulatory and judge-made law and following the advice of Supervisory
Drawback Liquidator Thomas L. Ferramosca, Delphi waited to file its drawback claims for HMT
and MPF in its post-liquidation protest.3 Delphi, 662 F. Supp. 2d at 1350 51. Because Customs
2
In general, Customs will repay fully, less one percent, the amount of duties paid upon
goods previously imported into the United States and used in the manufacture or production of
“commercially interchangeable” merchandise that is subsequently exported or destroyed. 19
U.S.C. § 1313(j). A claimant has three years from the date of exportation or destruction of the
merchandise to file a drawback claim. Id. § 1313(r)(1).
3
When Delphi filed the claims at issue, Customs’ regulations expressly prohibited HMT
and MPF drawback. See 19 C.F.R. § 191.3(b)(1) (2) (2002). Before 2004, the drawback statute
stated that the “duty, tax, or fee imposed . . . because of its importation . . . shall be refunded as
drawback.” 19 U.S.C. § 1313(j) (2000). In 1999, the Federal Circuit held that MPF was eligible
for drawback, as it was imposed because of importation. Texport Oil Co. v. United States, 185
F.3d 1291, 1296 (Fed. Cir. 1999). HMT was found not eligible for drawback, however, because
it was a general charge “against all shipments, regardless of whether they [were] imports.” Id.
While by late 1999 the law on MPF seemed to be settled, regulations did not change and
confusion continued at Customs for some years. See HQ 231068 (Aug. 30, 2005), available at
2005 WL 3086998. Thereafter, Congress passed the Miscellaneous Trade and Technical
Corrections Act of 2004, which clarified that MPF and HMT were eligible for drawback claims.
(continued...)
Court No. 06-00245 Page 3
delayed liquidation of Delphi’s drawback claims between August 1997 and June 2002, several of
Delphi’s HMT and MPF drawback claims made “by protest” were precluded by the statutory
three-year time limitation from the date of export for filing drawback claims. Id. at 1350 51 &
n.4. In January 2006, Customs denied Delphi’s protest with respect to the HMT and MPF
drawback requests for entries before June 12, 2000. Id. at 1351. Delphi challenged that decision
here in July 2006, and the court held that Delphi’s delayed drawback claims filing was allowed
under the time extension permitted by 19 U.S.C. § 1313(r)(1) because Customs was
“responsible” for Delphi’s delayed filing. Id. at 1355. Delphi now seeks attorney’s fees and
costs pursuant to § 2412(a)-(b) of EAJA.
DISCUSSION
Pursuant to United States Court of International Trade (“USCIT”) Rule 54.1,
“[t]he court may award attorney’s fees and expenses where authorized by law.” USCIT R.
54.1(a). Although the United States is generally immune from suit, EAJA waives the United
States’ sovereign immunity for purposes of allowing a prevailing party to recover attorney’s fees
and expenses under certain circumstances. See 28 U.S.C. § 2412. Delphi seeks attorney’s fees
pursuant to 28 U.S.C. § 2412(b), which allows fee-shifting against the United States “to the same
extent that any other party would be liable under the common law or under the terms of any
statute which specifically provides for such an award.”4 Id. § 2412(b). Under the common law
3
(...continued)
See Pub. L. No. 108-429, § 1557, 118 Stat. 2434, 2579 (2004); Aectra Ref. & Mktg., Inc. v.
United States, 565 F.3d 1364, 1369 70 (Fed. Cir. 2009).
4
The court notes that Delphi does not seek an award of attorney’s fees under the more
(continued...)
Court No. 06-00245 Page 4
“American Rule,” the prevailing party may not collect attorney’s fees from the losing party.
Centex Corp. v. United States, 486 F.3d 1369, 1371 (Fed. Cir. 2007). In certain rare
circumstances, however, an exception to this rule applies when a party opponent is found to have
“acted in bad faith, vexatiously, wantonly, or for oppressive reasons.” Chambers v. NASCO,
Inc., 501 U.S. 32, 45 46 (1991) (internal quotation marks and citations omitted); see also
Amsted Indus. Inc. v. Buckeye Steel Castings Co., 23 F.3d 374, 378 (Fed. Cir. 1994). Bad faith
is a high standard that warrants fee-shifting when a court finds “that fraud has been practiced
upon it, or that the very temple of justice has been defiled.” Universal Oil Prods. Co. v. Root
Ref. Co., 328 U.S. 575, 580 (1946).
In the underlying dispute, Delphi prevailed in its argument that the three-year
time limit for filing its drawback claims should have been extended under the final clause of 19
U.S.C. § 1313(r)(1), which states that “[n]o extension will be granted unless it is established that
the Customs Service was responsible for the untimely filing.” 19 U.S.C. § 1313(r)(1). In this
application, Delphi’s assertion of Customs’ bad faith is threefold. First, Delphi asserts that the
very failure of Customs to extend the statutory time limit for filing its drawback claims was in
bad faith. (Pl.’s Mot. 2.) Second, Customs allegedly acted in bad faith when it refused to admit
that it had “suspended” the liquidation of Delphi’s drawback claims and refused to settle the
4
(...continued)
common EAJA provision, 28 U.S.C. § 2412(d)(1)(A), which provides for fee-shifting when
certain requirements are met “unless the court finds that the position of the United States was
substantially justified.” 28 U.S.C. § 2412(d)(1)(A).
Court No. 06-00245 Page 5
claim, which Delphi asserts gave rise to an otherwise avoidable lawsuit.5 (See Pl.’s Mot. 5 6,
10, 16 .) And third, Customs allegedly acted in bad faith when it gave conflicting answers to
Delphi’s interrogatories asking why it delayed liquidation of Delphi’s drawback claims. (See
Pl.’s Mot. 10 13.) Delphi’s first two assertions are addressed together.
A. Customs’ Refusal to Process Delphi’s Drawback Claims
The Federal Circuit has “taken the position that fee awards cannot be assessed
based on claims of bad faith primary conduct.” Centex Corp., 486 F.3d at 1372. Primary
conduct is that which “precedes the accrual of the claim in question” and is “related to the
plaintiff’s substantive claim.” Id. at 1371 72, 1375. The Federal Circuit acknowledged,
however, “that there is some case law support for the proposition that the judicial process is
abused by a defendant’s bad faith response to a claim for relief after the claim accrues but before
the judicial process is formally invoked.”6 Id. at 1372 n.1. Those courts that have found bad
faith “primary conduct” that warranted fee-shifting emphasized that the plaintiff was forced to
litigate and defend a clear right. See Vaughan v. Atkinson, 369 U.S. 527, 531 (1962) (noting
that plaintiff was “forced to hire a lawyer and go to court to get what was plainly owed him
under laws that are centuries old”); see also Mar. Mgmt., Inc. v. United States, 242 F.3d 1326,
5
According to Delphi, Customs’ actions “caused [Delphi’s] untimely filing, forced
Delphi to incur the legal expenses,” and “[b]ut for Custom[s’] bad faith and wanton disregard of
its responsibilities, Delphi’s claims would have been paid in full without litigation.” (Pl.’s Mot.
13.)
6
The Federal Circuit did not decide the exact parameters of eligibility for fees, but
rejected fees based on bad faith conduct that precedes the accrual of the claim. See id. at 1375.
We need not explore the issue further, however, because Customs’ alleged bad faith pre-
litigation conduct does not warrant fee-shifting in this case.
Court No. 06-00245 Page 6
1335 (11th Cir. 2001) (per curiam); Am. Hosp. Ass’n v. Sullivan, 938 F.2d 216, 220 (D.C. Cir.
1991).
Although Delphi would have been entitled to drawback of its HMT and MPF if its
claims were timely filed, Delphi was not clearly entitled to a 19 U.S.C. § 1313(r)(1) statutory
extension of the time to file. Thus, Customs did not act in bad faith when it refused to process
Delphi’s delayed claims. At the time Delphi pressed its claim, Customs had not promulgated
any regulations to implement the extension provision, nor were the parties in the underlying case
able to cite to any instance in which Customs had granted an extension under the statutory
provision. Delphi, 662 F. Supp. 2d at 1354. Furthermore, no court had defined what conduct
would make Customs “responsible” for a delay in filing so as to warrant an extension.
Accordingly, this is not a case where Delphi was “forced to hire a lawyer and go to court to get
what was plainly owed [it] under laws that are centuries old.” Vaughan, 369 U.S. at 531.
Next, government officials are presumed to have acted in good faith, Galen Med.
Assocs., Inc. v. United States, 369 F.3d 1324, 1330 (Fed. Cir. 2004); Allegheny Bradford Corp.
v. United States, 350 F. Supp. 2d 1332, 1338 (CIT 2004), and Delphi has not met its burden by
showing that Customs’ pre-litigation conduct was so irregular as to amount to bad faith.
Customs indicated that the delay in processing Delphi’s drawback claims was due to
“destruction of documents that were housed in the World Trade Center in 2001” (Pl.’s Mot. Ex.
17, at 12), and that Delphi’s delayed claims were “selected for review; therefore, liquidation
could not occur until Delphi satisfied the request for information” (Pl.’s Mot. Ex. 18, at 3). The
court also notes the general state of confusion during the relevant time period as to the eligibility
of MPF and HMT for drawback the law was in a state of flux, see supra note 2, and Customs
Court No. 06-00245 Page 7
did not liquidate § 1313(p) claims between August 1997 and June 2002 “to address issues raised
by the trade community,” Delphi, 662 F. Supp. 2d at 1351 n.4 (internal quotation marks and
citation omitted). Delphi does not provide any evidence demonstrating that Customs acted in
bad faith when it did not process Delphi’s claims promptly and delayed liquidation. Thus, bad
faith on the part of the Government has not been demonstrated in connection with either the
processing of the administrative claims or the Government’s defense of this action.
B. Alleged Bad Faith Discovery Responses
Delphi also asserts that Customs acted in bad faith when it allegedly gave
contradictory responses to interrogatories asking why Customs delayed liquidation of Delphi’s
drawback claims.7 As indicated, § 2412(b) allows for a party to recover attorney’s fees “to the
same extent that any other party would be liable . . . under the terms of any statute which
provides for such an award.” 28 U.S.C. § 2412(b). The Federal Circuit held that this provision
includes Federal Rule of Civil Procedure 37, which gives a court the “authority to award
sanctions against a party for failing to cooperate during the discovery process.” M.A. Mortenson
Co. v. United States, 996 F.2d 1177, 1181 (Fed. Cir. 1993). USCIT Rule 37, which mirrors the
federal rules, permits the Court to award attorney’s fees and expenses when a party fails to
correct a response to an interrogatory “if the party learns that in some material respect the
disclosure or response is incomplete or incorrect.” USCIT R. 26(e)(1)(A) (emphasis added); see
7
One interrogatory answered by the Government stated that the delay was due to the
destruction of documents in the World Trade Center in 2001. (Pl.’s Mot. Ex. 17, at 12.) Another
interrogatory response denied that liquidation was suspended. (Pl.’s Mot. Ex. 18, at 5.) Customs
submitted a document during discovery, however, that indicated that Customs had suspended
liquidation. (Pl.’s Mot. Ex. 19.) The problem may have been semantic. What is meant by
“suspension” and what is a “hold” or informal delay is unclear.
Court No. 06-00245 Page 8
USCIT R. 37(c)(1)(A). Of course, the Court can also award attorney’s fees and expenses when it
grants a motion for an order compelling disclosure. USCIT R. 37(a). No such motion was filed.
Customs’ somewhat inconsistent responses to Delphi’s interrogatories do not
warrant awarding attorney’s fees under either aspect of the rule. Customs likely was not under
an obligation to clarify interrogatory answers because the issue of whether Customs had
“suspended” liquidation, and the reason therefor, was not material. It was undisputed that there
was an uncustomary delay in liquidation. Delphi delayed filing its drawback claims for HMT
and MPF because it was told to wait until the time for protesting liquidation to do so. Why
liquidation was delayed is irrelevant. Further, as explained in footnote seven, the court sees in
the interrogatory answers confusion or, at most, lack of attention to immaterial matters, as
opposed to an attempt to obstruct. Accordingly, Delphi’s motion for attorney’s fees is denied.
Delphi’s motion for filing costs is granted pursuant to 28 U.S.C. § 2412(a) and USCIT R.
54(d)(1).
/s/ Jane A. Restani
Jane A. Restani
Chief Judge
Dated: This 9th day of July, 2010.
New York, New York.