Slip Op. 03-78
UNITED STATES COURT OF INTERNATIONAL TRADE
BEFORE: HON. RICHARD W. GOLDBERG, SENIOR JUDGE
UNITED STATES,
Plaintiff,
v.
PAN PACIFIC TEXTILE GROUP,
INC., AVIAT SPORTIF, INC.,
BUDGET TRANSPORT, INC., PRIME
INTERNATIONAL AGENCY, BILLION Court No. 01-01022
SALES, EVER POWER CORP.,
AMERICAN CONTRACTORS INDEMNITY
COMPANY,
and
THOMAS MAN CHUNG TAO,
and
STEPHEN SHEN YU JUANG,
Defendants.
[Defendants’ motion for summary judgment is denied.]
Dated: July 8, 2003
Peter D. Keisler, Assistant Attorney General, David M. Cohen,
Director, A. David Lafer, Senior Trial Counsel, Commercial
Litigation Branch, Civil Division, United States Department of
Justice (Michael Panzera); Joanne M. Halley, Office of Associate
Chief Counsel, Bureau of Customs and Border Protection, United
States Department of Homeland Security, for plaintiff United
States.
Court No. 01-01022 Page 2
John Weber for defendants Thomas Man Chung Tao, Pan Pacific
Textile Group, Inc., and Aviat Sportif, Inc.
OPINION
GOLDBERG, Senior Judge: This case involves an action by the
United States Customs Service1 (“Customs”) against defendants Pan
Pacific Textile Group, Inc., Aviat Sportif, Inc., Budget
Transport, Inc., Prime International Agency, Billion Sales, Ever
Power Corp., American Contractors Indemnity Company, Thomas Man
Chung Tao, and Stephen Shen Yu Juang pursuant to 19 U.S.C. §
1592.2 Customs seeks civil penalties and recovery of unpaid
duties accrued from 68 unlawful entries of track suits imported
from the People’s Republic of China (“PRC”) into the United
States. Customs alleges fraud, gross negligence, and negligence
by the defendants. Tao, Pan Pacific, and Aviat Sportif
(collectively “Defendants”) move for summary judgment pursuant to
USCIT R. 9(b), 11(b), and 56 and also seek USCIT R. 11 sanctions
against plaintiff.
1
It has since become the Bureau of Customs and Border Protection
per the Homeland Security Act of 2002, § 1502, Pub. L. No. 107-
296, 116 Stat. 2135, 2308-09 (Nov. 25, 2002), and the
Reorganization Plan Modification for the Department of Homeland
Security, H.R. Doc. 108-32, p. 4 (Feb. 4, 2003).
2
Juang was owner/president of Prime International Agency, Budget
Transportation and controlled operations of Ever Power and
Billion Sales. Juang does not move for summary judgment.
Court No. 01-01022 Page 3
For the reasons set forth below, the Court denies
Defendants’ motion for summary judgment.
I. BACKGROUND
Tao was owner of Pan Pacific and Aviat Sportif. Customs
alleges that between 1995 and 1997, Tao and Juang carried out a
scheme by which track suits were illegally imported into the U.S.
from the PRC. Juang willfully and deliberately mis-identified
the tracksuits as plastic bags and other goods with 3% duty rates
in order to avoid the 30% duty rate applied to track suits.
Marcia A. Brown Declaration (“Brown Decl.”), ¶¶ 5, 8. For
Juang’s services, Tao paid a flat rate, significantly lower than
the actual duty amount. Id. at ¶ 11.
On or about November 26, 1996, Customs Special Agents began
investigating Juang’s alleged smuggling operation. United States
v. Thomas Tao, Criminal Complaint, ¶ 5 (S.D. Ca. 1996)
(Magistrate’s Case No. 98-57/M) (“Criminal Comp.”). On February
26, 1997, Customs searched the premises of a company owned by
Juang and seized numerous records. Id. The seized documents
revealed Tao’s complicity in the operation from 1994 to 1997.
Brown Decl. at ¶ 5. As a result of the seizure, Juang and Tao
were criminally prosecuted for conspiring to smuggle merchandise
into the United States; Tao was acquitted. Id. at ¶ 14.
Court No. 01-01022 Page 4
Along with the documents removed during the February 26,
1997 raid, Customs also seized 4,189 cartons of merchandise. The
confiscated track suits constituted part, but not all, of the 34
entries involved in Tao’s criminal case. Id. at ¶ 15. After his
acquittal, Tao filed a Motion for Return of Property, pursuant to
FRCP R. 41(e). The dutiable value of the tracksuits was
estimated to be $244,404.81, and the duty owed was valued at
$62,717. After paying the outstanding duties, the merchandise
was returned to Tao. Id. at ¶ 15.
On November 21, 2000, Customs filed the instant civil action
pursuant to 19 U.S.C. § 1592. Customs seeks duties for the
remaining 34 entries not already paid for, as well as for an
additional 34 entries not involved in the criminal trial.
Customs has valued the total domestic value of the merchandise at
$26,051,129, and the total duties owed at $2,034,159.80.
Plaintiff’s Complaint, ¶¶ 29, 37 (“Pl.’s Comp.”).3
Customs seeks $26,051,129 in civil penalties for fraud.
Alternatively, Customs seeks $956,406 for gross negligence or
$482,703 for negligence. Pl.’s Comp. at ¶¶ 31, 35. Customs
3
The $62,717 already paid by Tao is not part of this action.
Plaintiff’s Opposition to Defendant’s Motion for Summary
Judgment, 23 (“Pl.’s Opp.”).
Court No. 01-01022 Page 5
seeks $2,034,159 or, alternatively, $241,351, in recovery of lost
duties and fees. Pl.’s Comp. at ¶¶ 38, 41.
II. STANDARD OF REVIEW
“Summary judgment is proper ‘if the pleadings [together with
the discovery materials] 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.’” Celotex Corp. v. Catrett, 477
U.S. 317, 322 (1986)(quoting FRCP R. 56(c)). However, “if the
evidence is such that a reasonable jury could return a verdict
for the nonmoving party,” summary judgment will not be granted.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). All
inferences will be drawn in favor of the party opposing the
motion for summary judgment. United States v. Neman, 16 CIT 97,
784 F. Supp. 897 (1992).
III. DISCUSSION
In moving for summary judgment, Defendants make several
claims. First, Defendants argue that Customs’ complaint must be
dismissed under USCIT R. 9(b) for failing to state the
circumstances constituting fraud with particularity.
Second, Defendants argue that Customs’ claims are time barred by
the applicable statute of limitations under 19 U.S.C. § 1621.
Court No. 01-01022 Page 6
Third, Defendants claim that since Tao has paid all outstanding
duties to the government, Customs cannot seek recovery for lost
duties. Fourth, Defendants seek summary judgment and sanctions
against plaintiff due to alleged violations of USCIT R. 11. Each
of these arguments is addressed in turn.
A. Customs’ complaint is stated with sufficient particularity
to satisfy the requirements of USCIT R. 9(b).
Defendants argue that Customs has failed to meet the
standard set out by USCIT R. 9(b), requiring, “in all averments
of fraud or mistake, the circumstances constituting fraud or
mistake shall be stated with particularity.” USCIT R. 9(b).
Defendants contend that Customs’ complaint lacks a factual basis
as well as the requisite particularity. See Memorandum in
Support of Defendants’ Motion for Summary Judgment, 5 (“Defs.’
Memo.”). This argument is without merit.
The particularity required by Rule 9(b) does not mandate
that a plaintiff put forth an exhaustive substantiation of the
claims. U.S. v. Scope Imports, Inc., 10 CIT 410 (1986). The
rationale for the specificity requirement is to protect the
defendant from undue surprise in ensuing proceedings. United
States v. Valley Steel Products Co., 12 CIT 1161, 1163 (1988).
Therefore, “[i]f a complaint identifies the circumstances
constituting the fraud so that the defendant can respond to the
Court No. 01-01022 Page 7
allegations, Rule 9(b) has been satisfied.” United States v.
Priscilla Modes, Inc., 9 CIT 589, 599 (1985). In Priscilla, the
court identified three criteria that satisfied the Rule 9(b)
particularity requirement for a complaint under 19 U.S.C. § 1592:
(1) asserting that defendant’s behavior was fraudulent; (2)
listing the documents relied upon to establish fraud; and (3)
claiming an injury to plaintiff as a result of defendant’s
conduct. Id.
In the instant action, Customs’ complaint satisfies the Rule
9(b) requirement set forth in Priscilla. First, Customs clearly
asserted that Defendants’ behavior was fraudulent, alleging
“[t]he material false statements . . . were committed, or caused
by defendants Tao and Juang and their companies knowingly,
voluntarily, and intentionally and thus were fraudulent
violations of 19 U.S.C. § 1592(a).” Pl.’s Comp. at ¶ 27.
Second, Customs identifies the 68 entries that substantiate the
fraud. Id. at ¶ 16. Third, Customs adequately identifies the
injury caused by the fraud, stating, “as a result of the
violations. . . the United States was deprived of lawful customs
duties in the amount of $2,034,159.80.” Pl.’s Comp. at ¶ 22.
Therefore, Customs has clearly met the standard for a complaint
under 19 U.S.C. § 1592, and, accordingly, the Court denies
summary judgment for failure to satisfy USCIT R. 9(b).
Court No. 01-01022 Page 8
B. Issues of material fact exist as to when Customs discovered
the alleged violations.
The central issue for Defendants’ second argument is whether
the applicable statute of limitations in 19 U.S.C. § 1621 bars
Customs’ suit.4 According to the statutory scheme set forth by §
1621, a plaintiff must institute a claim pursuant to 19 U.S.C. §
1592 within five years of the offense. For cases of fraud,
however, the statute follows a discovery rule: a plaintiff need
only institute a claim of fraud within five years of discovery of
4
Section 1621 states:
No suit or action to recover any duty under section
1592(d), 1593a(d) of this title, or any pecuniary
penalty or forfeiture of property accruing under the
customs laws shall be instituted unless such suit or
action is commenced within five years after the time
when the alleged offense was discovered, or in the case
of forfeiture, within 2 years after the time when the
involvement of the property in the alleged offense was
discovered, whichever was later; except that--
(1)in the case of an alleged violation of section 1592
or 593a of this title, no suit or action (including a
suit or action for restoration of lawful duties under
subsection (d) of such sections) may be instituted
unless 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, and
(2)the time of the absence from the United States of
the person subject to the penalty or forfeiture, or of
any concealment or absence of the property, shall not
be reckoned within the 5-year period of limitation.
19 U.S.C. § 1621 (2003).
Court No. 01-01022 Page 9
the violation. Defendants argue that Customs’ fraud claims are
time barred, because the government was aware of possible §
1592(a) violations more than five years before filing the
complaint. In addition, Defendants argue that Customs’ gross
negligence and negligence claims should not apply to transactions
that took place more than five years before the complaint was
filed.
With respect to Defendants’ first contention, the issue in
dispute is when Customs discovered the alleged offense.
Defendants allege that Customs knew of the Tao-Juang scheme
before November 21, 1996. Defs.’ Memo. at 12. As such, Customs’
entire action for fraud should be barred. Customs argues that
the discovery date for the transactions in question was February
26, 1997, thus rendering Defendants’ statute of limitations
argument moot.
Defendants’ argument of Customs’ early knowledge of a Tao-
Juang scheme derives from the criminal complaint in the
aforementioned criminal prosecution, United States v. Thomas Tao.
In the criminal complaint, Special Agent David Peters stated,
“Beginning on or about November 26, 1996 . . . I assisted SSA
Henry Griffin . . . [with] his investigation of Stephen Juang.”
Criminal Comp. at ¶ 5. Customs argues that November 26, 1996
simply marked the beginning of an investigation of Juang. Pl.’s
Court No. 01-01022 Page 10
Opp. at 19. Customs claims only to have discovered information
that suggested a link between Tao and Juang on February 26, 1997,
when its monitoring of Juang’s activities resulted in a raid of
one of Juang’s companies. Id. According to Customs, only with
those documents seized on February 26, 1997 did the Tao-Juang
scheme become apparent. Brown Decl. at ¶ 9.
It is not necessary to resolve this issue on the merits at
this juncture. Customs presents a line of reasoning with some
degree of factual support. The question of when Customs actually
discovered the violation is an issue of material fact.
Therefore, summary judgment for Tao is not warranted.
With respect to Defendants’ second contention, there is no
meritorious argument. Defendants argue that Customs’ claims of
gross negligence and negligence should not apply to transactions
that occurred prior to November 21, 1996. Defs.’ Memo. at 8. In
Counts II and III, Customs does not seek damages for any
transactions that took place before that date. Therefore,
Defendants’ contention is irrelevant to Customs’ complaint, and
the Court denies summary judgment on the issue of Customs’
failure to satisfy 19 U.S.C. § 1621.
C. Tao’s payment for return of merchandise pursuant to FRCP R.
41(e) does not warrant summary judgment.
Court No. 01-01022 Page 11
Tao paid $62,717 to secure the return of merchandise seized
in the February 26, 1997 raid. Defendants argue that the
$62,717, plus Juang’s payment of a $1.4 million criminal fine,
reimburses Customs for any revenue deprived, thus warranting
dismissal on summary judgment. Defs.’ Memo. at 9. Defendants
further argue that Customs unreasonably inflated the amount of
duties owed. Therefore, in addition to dismissal, Defendants
also claim to be entitled to a partial refund of the $62,717
already paid. None of these allegations warrant summary
judgment.
Defendants’ argument is incompatible with Customs’ claim
because it does not directly challenge Customs’ allegations.
While Defendants argue that they should not stand trial for
entries lawfully made, Customs instead seeks recovery of entries
that remain unpaid. Customs contends that the seized garments
constitute only a very small portion of the total merchandise at
issue in this case. Customs further asserts that they
subtracted the $62,717 from their calculations for actual loss of
revenue. Pl.’s Opp. at 23-24. These issues remain to be
litigated at trial. Accordingly, the Court denies summary
judgment on the basis of this claim.
D. The alleged Rule 11 violations do not warrant summary
judgment nor sanctions.
Court No. 01-01022 Page 12
Defendants seek summary judgment and sanctions for alleged
violations of USCIT R. 11(b)(1), 11(b)(3) and 11(b)(4).5 First,
they argue that the government does not have sufficient evidence
that Tao was engaged in Juang’s illegal scheme, and therefore
Customs’ suit constitutes harassment. Second, they argue that
Customs’ claim that the merchandise is worth over $26 million is
“reckless inflation” aimed at recovering higher duties under the
lower standard of proof in civil actions. Defs.’ Memo. at 12.
Upon examination, neither of these contentions is a tenable basis
for either Rule 11 sanctions or summary judgment.
5
Rule 11(b) states:
By presenting to the court (whether by signing, filing,
submitting, or later advocating) a pleading, written motion,
or other paper, an attorney or unrepresented party is
certifying that to the best of the person’s knowledge,
information, and belief, formed after any inquiry reasonable
under the circumstances, ---
(1) it is not being presented for any improper purpose, such
as to harass or to cause unnecessary delay or needless
increase in the cost of litigation;
. . .
(3) the allegations and other factual contentions have
evidentiary support or, if specifically so identified, are
likely to have evidentiary support after a reasonable
opportunity for further investigation or discovery; and
(4) the denials of factual contentions are warranted on the
evidence or, if specifically so identified, are reasonably
based on a lack of information or belief . . .
USCIT R. 11(b).
Court No. 01-01022 Page 13
Defendants’ first claim, of harassment by Customs, is
unsupported. Customs has put forth sufficient evidence regarding
the Tao-Juang scheme to sufficiently convince the Court at this
juncture that its case is aimed at recovering outstanding duties
and not simply to harass Tao. If shown to be true, the dates,
extent, and manner of Tao’s involvement in the Tao-Juang scheme
is evident in the papers submitted to the Court. See Brown Decl.
Moreover, the prior criminal trial does not preclude the instant
civil suit because of the disparate burden of proof applied to
civil suits as opposed to criminal trials. See One Lot Emerald
Cut Stones and One Ring v. United States, 409 U.S. 232, 235
(1972).
Defendants’ second claim, regarding the amount sought by
Customs, is a factual issue. Customs asserts that $26,051,129
represents the total domestic value of the merchandise involved
in the suit. Pl.’s Comp. at ¶ 28; see also Letter from Robert
Thierry to Victor Sherman, Nov. 12, 2000. Defendants may
challenge Custom’s calculations. This, however, is an issue to
be taken up at trial. The numbers put forth are not frivolous
enough to warrant Rule 11 sanctions nor summary judgment.
Accordingly, the Court denies Defendants’ motion for summary
judgment on the basis of Rule 11 violations.
Court No. 01-01022 Page 14
IV. CONCLUSION
As discussed above, Defendants do not offer sufficiently
compelling arguments for summary judgment: (1) Customs’ complaint
meets the standards set out by USCIT R. 9(b); (2) there exist
issues of material fact as to whether Customs discovery of Tao’s
involvement falls within with the applicable statute of
limitations in 19 U.S.C. § 1621; (3) Defendant’s claim that they
have already reimbursed the Customs for lost revenues does not
directly challenge Customs’ allegations; and (4) Defendants have
not provided sufficient evidence of Rule 11 violations by
plaintiff. Accordingly, for the aforementioned reasons,
Defendants’ motion for summary judgment is denied.
Richard W. Goldberg
Senior Judge
Date: July 8, 2003
New York, New York
ERRATUM
United States v. Pan Pacific Textile Group, Inc., et al., Court
No. 01-01022, Slip Op. 03-78, issued July 8, 2003.
• On page 4, the first sentence of the second paragraph should
now read as follows: “On November 21, 2001, Customs filed
the instant civil action pursuant to 19 U.S.C. § 1592.”
July 14, 2003