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United States v. Lafidale, Inc.

Court of Appeals of International Trade

October 30, 2013

UNITED STATES, Plaintiff,
v.
LAFIDALE, INC., Defendant. Slip Op. 13-133

[Plaintiffs motion for default judgment against defendant Lafidale, Inc. in Customs penalty action denied with leave to refile.]

Carrie Dunsmore, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, for plaintiff. With her on the brief were Stuart F. Delery, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Franklin E. White, Jr., Assistant Director.

Before: Jane A. Restani, Judge Court No. 12-00397

OPINION AND ORDER

Jane A. Restani, Judge

Restani, Judge: Before the court is plaintiff United States' motion for default judgment seeking $324, 687.00 in civil penalties plus post-judgment interest against defendant Lafidale, Inc. ("Lafidale") for alleged grossly negligent violations of section 592(a) of the Tariff Act of 1930, 19 U.S.C. § 1592(a) (2006). The complaint's well-pled facts establish defendant's liability for a civil penalty. As explained below, however, the penalty calculation offered by plaintiff appears to be internally inconsistent and to impose a penalty in excess of the statutory maximum. Plaintiffs motion for default judgment is therefore denied with leave for plaintiff to refile its motion for default judgment with a proper affidavit fully explaining plaintiff's penalty calculation.

BACKGROUND

Between June 20, 2006, and April 22, 2009, Lafidale entered or attempted to enter handbags and wallets into the United States on 46 separate occasions. Compl. ¶ 4, ECF No. 2. The handbags were classified under Harmonized Tariff Schedule of the United States ("HTSUS") 4202.29.10 and the wallets were classified under HTSUS 4202.39.50; these classifications apply to plastic handbags and wallets that are "wholly or mainly covered with paper." Id. ¶ 6. None of the imported entries qualified as "wholly or mainly covered with paper." Id. Rather, the items should have been classified under different HTSUS subheadings, primarily HTSUS 4202.22.15, covering, inter alia, handbags and wallets "[w]ith outer surface of sheeting of plastic, " which would have imposed higher ad valorum duty rates than the subheadings used by Lafidale. Id.

U.S. Customs and Border Protection ("CBP") determined the domestic value of the 46 entries was $753, 929.00 and that the misclassification caused an actual and potential loss of revenue of $81, 171.63. Id. ¶ 9. CBP issued a notice of penalty to Lafidale for $324, 687.00, an amount corresponding to four times the lost revenue, on September 30, 2010. Id. ¶ 10. Lafidale has yet to pay any part of the penalty. Id. ¶ 12. Plaintiff filed a complaint against Lafidale on December 3, 2012, seeking a civil penalty for gross negligence in the amount of $324, 687.00. Id. at 4. Default was entered against Lafidale on June 13, 2013, for failing to plead or otherwise defend within 20 days of being served with the summons and complaint. Entry of Default, ECF No. 10. Plaintiff filed this motion for default judgment on July 11, 2013. Pl.'s Mot. for Default J., ECF No. 11. Lafidale did not respond.

JURISDICTION

The court has jurisdiction pursuant to 28 U.S.C. § 1582(1), providing for jurisdiction over cases initiated by the United States to recover civil penalties under, inter alia, section 592 of the Tariff Act of 1930.

DISCUSSION

Plaintiff has moved for a default judgment. Under USCIT Rule 55(b), default judgment is warranted when (1) the defendant has been defaulted, and (2) the claim is for a sum certain, supported by an affidavit showing the amount due. Default was entered against Lafidale on June 13, 2013. Entry of Default. Plaintiff seeks civil penalties in the amount of $324, 687.00, see Compl. at 4, and its motion for default judgment was supported by an affidavit purporting to explain this figure. See Thierry Decl., ECF No. 11-1. Plaintiff therefore has met the requirements for default judgment under USCIT Rule 55(b). The court, however, must ensure that the pled facts amount to a legitimate cause of action before granting the relief requested. United States v. Scotia Pharms. Ltd., Slip Op. 09-49, 2009 WL 1410437, at *3 (CIT May 20, 2009). The court accepts as true all well-pled facts in the complaint other than those pertaining to the amount of damages. Id.

I. Plaintiff's Complaint Sufficiently Establishes a Legitimate Cause of Action

Plaintiff seeks civil penalties for grossly negligent violations of section 592 of the Tariff Act of 1930. Section 592(a) provides in part that "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." 19 U.S.C. § 1592(a)(1)(A). The well-pled facts in plaintiff's complaint must demonstrate that Lafidale entered or attempted to enter merchandise into ...


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