United States v. Universal Fruits & Vegetables Corp.

Slip Op. 06-79
UNITED STATES COURT OF INTERNATIONAL TRADE

_________________________________________
:
UNITED STATES, :
:
Plaintiff, :
:
v. : Before: Carman, Judge
:
UNIVERSAL FRUITS AND VEGETABLES CORP., : Court No. 04-00431
DAVID PAI, a.k.a. SHIH WEI PAI, :
JASON PAI, a.k.a. CHUNG SHENG PAI, :
:
Defendants. :
________________________________________:

[For want of jurisdiction, this case is dismissed.]

Peter D. Keisler, Assistant Attorney General; David M.
Cohen, Director, Commercial Litigation Branch, Civil Division,
United States Department of Justice; Jeanne M. Davidson, Deputy
Director, Commercial Litigation Branch, Civil Division, United
States Department of Justice; Alan J. Lo Re and Sean McNamara,
Commercial Litigation Branch, Civil Division, United States
Department of Justice, Washington, D.C., for Plaintiff.

Neville Peterson LLP (John M. Peterson and Curtis W.
Knauss), New York, NY, for Defendants.

Dated: May 25, 2006

OPINION

CARMAN, JUDGE : This Court heard oral argument on March 23,

2006, in this matter. Plaintiff United States brings this action

under 31 U.S.C. § 3729(a)(7) (2000), alleging that Defendants

Universal Fruits and Vegetables Corporation (“Universal”),

founder-president David Pai, a.k.a. Shih Wei Pai (“David Pai”),
Court No. 04-00431 Page 2

and employee-father Jason Pai, a.k.a. Chung Sheng Pai (“Jason

Pai”),1 fraudulently transhipped and misrepresented the country

of origin of four shipments of fresh garlic as the Republic of

Korea to avoid antidumping duties assessed on fresh garlic from

the People’s Republic of China. Upon consideration of parties’

oral arguments and written submissions, this Court holds that it

does not have jurisdiction over this matter.

PROCEDURAL HISTORY

On November 2, 2000, Plaintiff commenced this action against

Defendants, alleging violation of 31 U.S.C. § 3729(a)(7)

(“FCA”),2 in the United States District Court, Central District

1
For convenience, this Court will refer to the defendants
collectively as “Defendants,” unless addressing a particular
defendant.
2
31 U.S.C. § 3729 is known as the False Claims Act.
Section 3729(a)(7), commonly called the “Reverse False Claims
Act,” states:

(a) Liability for certain acts.–Any person who–

. . .

(7) knowingly makes, uses, or causes to be
made or used, a false record or statement to
conceal, avoid, or decrease an obligation to
pay or transmit money or property to the
Government,

is liable to the United States Government for a
civil penalty of not less than $5,000 and not more
than $10,000, plus 3 times the amount of damages
which the Government sustains because of the act
of that person. . . .
Court No. 04-00431 Page 3

of California, Western Division (“District Court”). Plaintiff

filed a motion for summary judgment.

On December 17, 2001, after a hearing on Plaintiff’s motion

for summary judgment, the District Court granted judgment in

favor of Plaintiff and ordered Defendants Universal and David Pai

to pay $1,957,237, and Defendant Jason Pai to pay $1,952,237.

United States v. Universal Fruits & Vegetables Corp., No. CV

00-11698-R, 2001 U.S. Dist. LEXIS 25815, at *1-2 (C.D. Cal.

Dec. 3, 2001) (“Universal I”). The District Court apparently

based its award on the actual duties avoided of $644,079, which

were trebled, plus $5,000 in civil penalties for each of the four

false statements made to the United States Customs Service3

(“Customs”) pursuant to 31 U.S.C. § 3729(a)(7).

On March 13, 2002, Defendants timely appealed, arguing that

the District Court lacked subject matter jurisdiction because the

United States Court of International Trade (“CIT”) has exclusive

jurisdiction for actions involving customs duties pursuant to

28 U.S.C. § 1582.

On March 17, 2004, the United States Court of Appeals for

the Ninth Circuit (“Ninth Circuit”) reversed for lack of subject

matter jurisdiction and dismissed the case. United States v.

Universal Fruits & Vegetables Corp., 362 F.3d 551 (9th Cir. 2004)

(“Universal II”). On June 2, 2004, upon Plaintiff’s request, the

3
Now known as the Bureau of Customs and Border Protection.
Court No. 04-00431 Page 4

Ninth Circuit amended its original decision and remanded the case

with instruction to the District Court to transfer the case to

this Court pursuant to 28 U.S.C. § 1631 (2000).4 United States

v. Universal Fruits & Vegetables Corp., 370 F.3d 829 (9th Cir.

2004) (“Universal III”). The Ninth Circuit left to this Court

“the question of its own jurisdiction.” Id. at 836-37 (quotation

omitted). Pursuant to the Ninth Circuit’s mandate, the District

Court transferred the case to this Court.

On April 20, 2005, this Court held an oral argument to

consider the issue of jurisdiction. Upon consideration of

parties’ oral presentation and briefs, this Court issued an

opinion, with which familiarity is presumed, holding that

jurisdiction was plausible. United States v. Universal Fruits,

29 CIT __, 387 F. Supp. 2d 1251 (CIT 2005) (“Universal IV”). As

Defendants noted, “[t]he Court did not expressly hold, however,

that it had jurisdiction to entertain the government’s demand for

‘damages’ (as opposed to [c]ustoms duties), noting that the issue

4
28 U.S.C. § 1631, in relevant part, states:

Whenever a civil action is filed in a court . . .
and that court finds that there is a want of
jurisdiction, the court shall, if it is in the
interest of justice, transfer such action or
appeal to any other such court in which the action
. . . could have been brought at the time it was
filed . . . and the action . . . shall proceed as
if it had been filed in . . . the court to which
it is transferred on the date upon which it was
actually filed in . . . the court from which it is
transferred.
Court No. 04-00431 Page 5

was ‘ripe’ for determination in this case.” Defs.’ Mem. of Law

and P. of A. in Supp. of Its Mot. to Dismiss Pursuant to 12(b)(5)

at 6-7.

Before the Court are Plaintiff’s motion for summary judgment

and Defendants’ motion to dismiss. Defendants requested oral

argument on their motion to dismiss. The Court granted

Defendants’ request, and on March 23, 2006, this Court heard oral

argument. This Court cannot reach parties’ substantive motions

because, upon further consideration, it concludes it lacks

jurisdiction to hear Plaintiff’s claim.

JURISDICTION

Jurisdiction has encumbered this action since the appeal of

the District Court’s decision. Although the District Court

claimed jurisdiction, the Ninth Circuit reversed and held that

the District Court lacked jurisdiction to hear this case because

precedent requires “upholding the exclusivity of the [CIT’s]

jurisdiction” when “faced with conflicts between the broad grants

of jurisdiction to the district courts and the grant of exclusive

jurisdiction of the [CIT].” Universal III, 370 F.3d at 836

(citation and internal quotations omitted). The Ninth Circuit

opined that “if the government could bring an FCA claim in

district court whenever a party fraudulently withholds customs

duties, then the exclusive jurisdiction over actions to recover
Court No. 04-00431 Page 6

customs duties in all such instances would become a virtual

nullity.” (Id. at 836.)

After oral argument and consideration of briefs regarding

jurisdiction, this Court found that the transfer of this matter

from the District Court was plausible. Universal IV, 387 F. Supp.

2d at 1254. Because this matter involves avoidance of

antidumping duties owed to Customs, both parties asserted

jurisdiction in this Court under 28 U.S.C. § 1582(3) (2000).5 In

jurisdictional conflicts between district courts and the CIT, 28

U.S.C. § 1340 (2000)6 affirms this Court’s exclusive

jurisdiction. Both parties have repeatedly conceded this Court’s

jurisdiction to entertain matters regarding customs duties. (See

Pl.’s Br. Regarding Jurisdiction at 1; Defs.’ Br. Concerning the

Ct.’s Subject Matter Jurisdiction of This Action at 1;

5
28 U.S.C. § 1582(3) provides:

The Court of International Trade shall have
exclusive jurisdiction of any civil action which
arises out of an import transaction and which is
commenced by the United States–

. . .

(3) to recover customs duties.
6
28 U.S.C. § 1340 provides:

The district courts shall have original
jurisdiction of any civil action arising under any Act
of Congress providing for internal revenue, or revenue
from imports or tonnage except matters within the
jurisdiction of the Court of International Trade.
Court No. 04-00431 Page 7

Jurisdiction Hr’g Tr. 4, 33, Apr. 20, 2005; Oral Argument Tr. 7,

65-66, Mar. 23, 2006.) Upon initial consideration of this

matter, this Court claimed jurisdiction under 28 U.S.C. § 1582(3)

and 28 U.S.C. § 1340. Universal IV, 387 F. Supp. 2d at 1258.

Upon subsequent examination, however, for the following reasons,

this Court holds it lacks jurisdiction to grant the relief

provided under the False Claims Act.

A. False Claims Act

1. FCA Background

The FCA has a long history. Originally known as the

“Lincoln Law” when enacted in 1863, Congress adopted the FCA to

combat subcontractor fraud during the Civil War. See Joan R.

Bullock, The Pebble in the Shoe: Making the Case for the

Government Employee, 60 Tenn. L. Rev. 365, 368-69 (1993). The

FCA’s original language allowed any person to bring a FCA action

on behalf of the government and collect one-half of the recovery.

Id. at 369. On the heels of the United States Supreme Court’s

(“Supreme Court”) broad ruling in United States ex rel. Marcus v.

Hess, 317 U.S. 537 (1943),7 Congress amended the FCA to limit its

scope. Courts restrictively interpreted the new language in the

7
The Supreme Court held that the language of the FCA did
not require that a realtor bring any original information to the
lawsuit. Hess, 317 U.S. at 537.
Court No. 04-00431 Page 8

1943 Amendments, and the number of FCA lawsuits substantially

decreased. Subsequently, another federal court decision, this

time by a narrow reading of the statute, invited Congress to

amend the FCA’s language. See United States ex rel. Wisconsin v.

Dean, 729 F.2d 1100 (7th Cir. 1984).

In response to the Dean decision, Congress swung the

pendulum of the FCA yet again. Congress stated, “[S]everal

restrictive court interpretations of the [FCA] have emerged which

tend to thwart the effectiveness of the statute,” and therefore

the amendments were “aimed at correcting restrictive

interpretations . . . to make the [FCA] a more effective weapon

against Government fraud.” S. Rep. No. 99-345, at 4 (1978),

reprinted in 1986 U.S.C.C.A.N. 5266, 5269. The 1986 Amendments

“provided incentives for private enforcement, including increased

monetary awards, adopted a lower burden of proof, and allowed the

[qui tam] plaintiff to remain a party to the action even if the

Government intervenes.” United States ex rel. McKenzie v.

Bellsouth Telecomm., Inc., 123 F.3d 935, 938 (6th Cir. 1997)

(quotation and citation omitted). Among these changes, Congress

added the reverse false claims act provision, which broadens the

scope of FCA liability to individuals who “make a material

misrepresentation to avoid paying money owed the Government . . .

as if he had submitted a false claim to receive money.” S. Rep.
Court No. 04-00431 Page 9

No. 99-345, at 18. The government brings its claim under this

provision.

This FCA action is an issue of first impression before this

Court. In 1997, a FCA suit appeared at this court. See United

States ex rel. Felton v. Allflex USA, Inc., 21 CIT 1344, 989

F. Supp. 259 (1997). The Allflex court held it lacked subject

matter jurisdiction and retransferred the suit to the district

court because it was a qui tam8 suit.9 See id. The Allflex

court, therefore, did not reach merits of the case. In contrast,

this action was commenced by the United States. Although

distinguishable from Allflex and for different reasons, this

Court also cannot reach the substantive motions before it.

2. Statutory Construction

In its claim for relief, Plaintiff prays for “treble the

amount of actual damages sustained by the United States, plus

such civil penalties as are allowable by law against defendants.”

(Compl., Prayer, ¶ A.) During oral argument, upon the Court’s

questioning, Plaintiff asserted that “this is an action to

recover damages with reference to duties.” (Oral Argument Tr.

8
For purposes of determining the court’s jurisdiction, the
Allflex court defined a qui tam suit as that which is “‘commenced
by’ the private actor, not the Government.” Allflex, 21 CIT at
1349. This court’s exclusive jurisdiction is limited to civil
actions “commenced by the United States.” See 28 U.S.C. § 1582.
9
For further discussion of the Allflex case, see Universal
IV, 387 F. Supp. 2d at 1257-58.
Court No. 04-00431 Page 10

59-60). Defendants argued, however, that this is an action to

recover duties in the form of damages. (Id. at 9.)

The Court now turns to the stated claim and available relief

under the FCA. Upon a reading of the statute, the relief granted

under the FCA is for damages and civil penalties with no

reference to duties. See 31 U.S.C. § 3729(a)(7)(“liable to the

United States Government for a civil penalty of not less than

$5,000 and not more than $10,000, plus 3 times the amount of

damages which the Government sustains”). The Supreme Court has

described this current version of the FCA damage provision as

“essentially punitive in nature.” Vt. Agency of Natural Res. v.

United States, 529 U.S. 765, 784 (2000).

This Court finds that a plain reading of the FCA does not

provide for the recovery of any duties, customs or otherwise.

The only statutory provision upon which this Court could claim

jurisdiction over this matter is if the suit sought “to recover

customs duties.” 28 U.S.C. § 1582(3). Rather than recovery of

actual duties owed, the FCA provides for three times the amount

of damages the government sustains, or if construed favoring

Plaintiff’s prayer, then three times what would have been the

duties owed plus civil penalties. However, the customs duties

that were owed are not recoverable under the language of the FCA.

Because the language of these statutes is at issue, this Court

must look to the statutory cannons of construction. An
Court No. 04-00431 Page 11

examination of the entirety of 28 U.S.C. § 1582 sheds light on

the readings of the provision at issue:

The Court of International Trade shall have exclusive
jurisdiction of any civil action which arises out of an
import transaction and which is commenced by the United
States–
(1) to recover a civil penalty under section 592,
593A, 641(b)(6), 614(d)(2)(A), 704(i)(2), or 734(i)(2)
of the Tariff Act of 1930;
(2) to recover upon a bond relating to the
importation of merchandise required by the laws of the
United States or by the Secretary of the Treasury; or
(3) to recover customs duties.

28 U.S.C. § 1582. The first step in a statutory construction

analysis “is to determine whether the language at issue has a

plain and unambiguous meaning with regard to the particular

dispute in the case.” Barnhart v. Sigmon Coal Co., Inc., 534

U.S. 438, 450 (2002) (quotation and citations omitted). On its

face, section one reads “to recover a civil penalty” applicable

to certain provisions of the Tariff Act of 1930; section two

reads “to recover upon a bond;” and section three reads “to

recover customs duties.” This Court notes that section one

specifies a “civil penalty” while section three specifies

“customs duties.”

This Court finds that the language of 28 U.S.C. § 1582 is

clear and unambiguous: section three does not include recovery of

damages, which is omitted from the entirety of this statute, or

penalties, which is expressly stated only in section one. It is

well-established that “[w]here Congress includes particular
Court No. 04-00431 Page 12

language in one section of a statute but omits it in another

section of the same Act, it is generally presumed that Congress

acts intentionally and purposefully in the disparate inclusion or

exclusion.” Russello v. United States, 464 U.S. 16, 23 (1983)

(quotation and citation omitted).

Without any support to the contrary, the general presumption

of this well-established principle of statutory construction

stands in this case. Therefore, this Court’s jurisdiction is

limited under 28 U.S.C. § 1582(3) to the government’s effort to

recover only “customs duties” and does not extend to actions to

recover “civil penalties” or “damages.” However, Plaintiff’s

complaint characterizes this as an action to recover civil

penalties and damages. (Compl. ¶ 1.) This Court cannot shoehorn

customs duties into a statute that unequivocally provides for

damages and penalties. Although this Court does have the

jurisdiction to grant certain civil penalties, this authority is

limited to specific statutory provisions that are not before this

Court. Accordingly, this Court lacks the jurisdiction to hear

Plaintiff’s claim.

As noted by the Court of Appeals for the Federal Circuit,

“[t]his court can only interpret the statues that are enacted by

the Congress. Any changes that parties may seek in order to

eliminate a statutory incongruity should be brought to the

attention of Congress. We are simply powerless to amend any
Court No. 04-00431 Page 13

statutory provision sua sponte.” Boyer v. West, 210 F.3d 1351,

1356 (Fed. Cir. 2000). This check also applies to this Court.

Under current construction, this Court lacks the statutory

authority to grant Plaintiff its requested relief. This Court is

of limited jurisdiction and is not vested with the authority to

grant Plaintiff’s claim for damages and penalties pursuant to the

FCA.

CONCLUSION

For the reasons stated herein, this Court holds it lacks

jurisdiction over this matter.

/s/ Gregory W. Carman
Gregory W. Carman

Dated: May 25, 2006
New York, New York