United States v. American Home Assurance Co. , 857 F.3d 1329 ( 2017 )

United States Court of Appeals
for the Federal Circuit
______________________
UNITED STATES,
Plaintiff-Appellant
v.
AMERICAN HOME ASSURANCE COMPANY,
Defendant-Cross-Appellant
______________________
2016-1088, 2016-1090
______________________
Appeals from the United States Court of International
Trade in Nos. 1:09-cv-00403-LMG, 1:10-cv-00125-LMG,
1:10-cv-00175-LMG, 1:10-cv-00343-LMG, Judge Leo M.
Gordon.
______________________
Decided: May 26, 2017
______________________
BEVERLY A. FARRELL, International Trade Field Of-
fice, Commercial Litigation Branch, Civil Division, United
States Department of Justice, New York, NY, argued for
plaintiff-appellant. Also represented by AMY M. RUBIN;
BENJAMIN C. MIZER, JEANNE E. DAVIDSON, Washington,
DC; BRANDON ROGERS, Office of Assistant Chief Counsel,
United States Customs and Border Protection, Indianapo-
lis, IN; PAULA S. SMITH, New York, NY.
2 U.S. v. AMERICAN HOME ASSURANCE CO.
HERBERT C. SHELLEY, Steptoe & Johnson, LLP, Wash-
ington, DC, argued for defendant-cross-appellant. Also
represented by MARK FREDERICK HORNING.
EDWARD GRAHAM GALLAGHER, The Surety & Fidelity
Association of America, Washington, DC, for amicus
curiae The Surety & Fidelity Association of America.
______________________
Before MOORE, TARANTO, and CHEN, Circuit Judges.
MOORE, Circuit Judge.
The government appeals from the United States
Court of International Trade’s (“Trade Court”) judgment
on the pleadings holding that the government is not
entitled to non-statutory equitable interest for unpaid
antidumping duties for imported goods. United States v.
Am. Home Assur. Co., 100 F. Supp. 3d 1364, 1373 (Ct.
Int’l Trade 2015) (“AHAC II”). American Home Assurance
Company (“AHAC”) cross-appeals the Trade Court’s
decision to award the government interest on the unpaid
duties under 19 U.S.C. §§ 580 and 1505(d). Id. at 1371.
We affirm the Trade Court decision on all issues.
BACKGROUND
This appeal stems from four collection actions in
which the government sought to recover unpaid anti-
dumping duties from AHAC, a surety. AHAC secured
three different importers’ importation of preserved mush-
rooms and crawfish tail meat from China by issuing
numerous single transaction and continuous entry bonds
in 2001 and 2002. The issued bonds obligated the import-
ers and AHAC to pay, up to the face amounts of the
bonds, “any duty, tax or charge and compliance with law
or regulations” resulting from covered activities. Customs
liquidated the entries secured by the bonds and assessed
antidumping duties on the merchandise. Each importer
failed to pay the duties owed. The parties do not dispute
US v. AMERICAN HOME ASSURANCE CO. 3
that AHAC is liable for the principal amounts of anti-
dumping duties owed on the bonds.
After liquidation, Customs started charging statutory
post-liquidation interest on the unpaid duties of two of the
collections that did not exceed the face amount of the
bonds pursuant to 19 U.S.C. § 1505(d) (“§ 1505(d) inter-
est”). From 2003 to 2009, Customs issued multiple de-
mands notifying AHAC of the government’s intent to seek
§ 1505(d) interest. AHAC protested the government
demands and Customs denied the protest. AHAC could
have challenged Customs’ denial at the Trade Court
under 28 U.S.C. § 1581(a), but elected not to do so. In
2009, the government commenced four suits at the Trade
Court for the collection of unpaid duties and interest,
which the Trade Court consolidated. After discovery, the
parties cross-moved for summary judgment. Relevant to
this appeal, the parties disputed the application of equi-
table prejudgment interest, § 1505(d) interest, and 6%
statutory prejudgment interest under 19 U.S.C. § 580
(“§ 580 interest”).
The Trade Court granted in part and denied in part
both the government’s and AHAC’s motions. It ordered
AHAC to pay § 1505(d) interest up to the face amounts of
the bonds. It held that § 1505(d) interest involves “charg-
es or exactions of whatever character” under 19 U.S.C.
§ 1514(a)(3) and that the statute does not contain an
exception for charges or exactions arising after liquida-
tion. It held that the bonds statutorily and contractually
serve to secure the payment of duties and any interest—
they do not distinguish between pre- and post-liquidation
interest. It held that because the § 1505(d) interest
determination is “final and conclusive” under § 1514(a)
and AHAC failed to contest its denied protest, AHAC was
precluded from asserting any defenses regarding its
liability for § 1505(d) interest.
4 U.S. v. AMERICAN HOME ASSURANCE CO.
The Trade Court also held AHAC liable for § 580 in-
terest, which is 6% statutory prejudgment interest. The
Trade Court declined to award equitable prejudgment
interest because the 6% rate of the § 580 interest “far
exceeds the applicable rates at which the Government
would receive equitable interest” and awarding equitable
prejudgment interest in these circumstances would over-
compensate the government. The government appeals
the Trade Court’s denial of non-statutory equitable inter-
est, and AHAC cross-appeals the Trade Court’s award of
§ 580 and § 1505(d) interest to the government. We have
jurisdiction pursuant to 28 U.S.C. § 1295(a)(5).
DISCUSSION
We review the Trade Court’s grant or denial of sum-
mary judgment for correctness as a matter of law and we
decide de novo “the proper interpretation of the governing
statute and regulations as well as whether genuine issues
of material fact exist.” United States v. Am. Home Assur.
Co., 789 F.3d 1313, 1319 (Fed. Cir. 2015) (“AHAC I”). We
review the Trade Court’s determination not to award
equitable prejudgment interest for abuse of discretion.
Princess Cruises, Inc. v. United States, 397 F.3d 1358,
1367 (Fed. Cir. 2005).
A. Equitable Prejudgment Interest
The government argues the Trade Court erred in
denying the government equitable prejudgment interest
because its decision was predicated on the assumption
that § 580 interest is compensatory. It argues the pur-
pose of equitable prejudgment interest is to compensate
the government for the time value of money, whereas the
purpose of § 580 interest is to penalize a noncompliant
party. We do not agree with the government’s characteri-
zation. While we agree that § 580 interest and equitable
prejudgment interest are not mutually exclusive, the
mere availability of dual sources of prejudgment interest
does not mandate their application in every case. The
US v. AMERICAN HOME ASSURANCE CO. 5
Trade Court retains broad discretion to apply equitable
prejudgment interest in accordance with the facts of each
case.
Equitable prejudgment interest “serves to compensate
for the loss of use of money due as damages from the time
the claim accrues until judgment is entered, thereby
achieving full compensation for the injury those damages
are intended to redress.” Princess Cruises, 397 F.3d at
1367 (quoting West Virginia v. United States, 479 U.S.
305, 310 n.2 (1987)). No statute or regulation explicitly
authorizes equitable prejudgment interest; its award is
governed by traditional judge-made principles. Id. Fac-
tors a court may consider in awarding equitable prejudg-
ment interest may include the degree of wrongdoing on
the part of the defendant, the availability of alternative
investment opportunities to the plaintiff, whether the
plaintiff delayed bringing the action, and other funda-
mental considerations of fairness. United States v. Great
Am. Ins. Co. of N.Y., 738 F.3d 1320, 1326 (Fed. Cir. 2013).
In its entirety, 19 U.S.C § 580 states: “Upon all bonds,
on which suits are brought for the recovery of duties,
interest shall be allowed, at the rate of 6 per centum a
year, from the time when said bonds became due.” Sec-
tion 580 applies to bonds securing the payment of anti-
dumping duties when the government sues for payment
under those bonds. AHAC I, 789 F.3d at 1324–28.
Generally, equitable remedies are unavailable when a
party has an adequate statutory remedy. Morales v.
Trans World Airlines, Inc., 504 U.S. 374, 381 (1992);
accord West Virginia, 479 U.S. at 308–09 (“In the absence
of an applicable federal statute, it is for the federal courts
to determine, according to their own criteria, the appro-
priate measure of damage, expressed in terms of interest,
for nonpayment of the amount found to be due.”). AHAC
argues that to allow both statutory prejudgment interest
at 6% and equitable prejudgment interest would amount
6 U.S. v. AMERICAN HOME ASSURANCE CO.
to a windfall to the government and permit double recov-
ery or more. In the current environment where interest
rates are less than 6%, the statutory rate chosen by
Congress under § 580 amounts to full recovery plus some.
This, of course, is Congress’ choice and we are bound by
the statute.
The availability of statutory interest would normally
render equitable interest unavailable. Here, however,
Congress expressly indicated the availability of both
statutory and equitable prejudgment interest when it
enacted the Trade Facilitation and Trade Enforcement
Act of 2015 (“TFTEA”). See Pub. L. No. 114–125, 130
Stat. 122. TFTEA provided authority for the government
to deposit interest earned on antidumping duties into the
special account created by the Continued Dumping and
Subsidy Offset Act. 19 U.S.C. § 4401. Congress recog-
nized that interest earned on antidumping duties includes
“[e]quitable interest under common law and interest
under section 580 of this title awarded by a court against
a surety under its bond for late payment of antidumping
duties.” Id. § 4401(c)(2)(C) (emphasis added). The plain
meaning of this statutory language indicates that Con-
gress recognized that a court may award both equitable
and § 580 interest. See also AHAC I, 789 F.3d at 1330.
That the Trade Court may, in its discretion, award
dual sources of prejudgment interest does not mean that
the Trade Court must award dual sources of prejudgment
interest when the government brings an action to recover
duties. The fact that the plain language of § 580 covers
bonds securing the payment of antidumping duties does
not transform the statute into one that is punitive in
nature. In fact, the statute expressly designates the § 580
monies as “interest.” We conclude that the Trade Court
retains broad discretion to apply nonstatutory prejudg-
ment interest according to traditional equitable princi-
ples, which is exactly what it did in this case.
US v. AMERICAN HOME ASSURANCE CO. 7
The Trade Court did not abuse its discretion in con-
cluding that equitable prejudgment interest is unneces-
sary. It recognized our decision in AHAC I and noted that
an award under § 580 may “alter[] the landscape” with
respect to equitable prejudgment relief. AHAC II, 100 F.
Supp. 3d at 1371 (quoting AHAC I, 789 F.3d at 1330).
The Trade Court then reviewed various equitable factors,
noting that the government did not unreasonably delay
bringing this action, although its “timing may not have
been optimal,” and “AHAC has never paid the outstand-
ing duties, with one exception, despite Customs’ numer-
ous requests.” Id. at 1372–73. Ultimately, the Trade
Court determined that “[§] 580 interest more than fairly
compensates the Government for the time value of the
unpaid duties” because the 6% rate under § 580 “far
exceeds the applicable rates at which the Government
would receive equitable interest.” Id. at 1373. While the
government correctly points out that the Trade Court
stated that the factors in this case “may favor an award of
equitable interest,” id., the court has discretion to weigh
the factors and is not required to come out in any particu-
lar way. See United States v. Nat’l Semiconductor Corp.,
547 F.3d 1364, 1368–69 (Fed. Cir. 2008) (“[T]he trial
court’s discretion permits more than simply counting the
factors pointing in each direction.”). We see no abuse of
discretion in its weighing of relevant factors and thus
affirm the Trade Court’s decision not to award equitable
prejudgment interest.
B. § 580 Interest
AHAC argues the Trade Court erred by awarding
§ 580 interest on § 1505(d) interest and by calculating
§ 580 interest from the date of Customs’ first demand,
rather than the date of Customs’ first demand after
denying AHAC’s protests. AHAC also argues that the
Trade Court abused its discretion by declining to permit
AHAC to make a deposit in an interest-bearing account to
8 U.S. v. AMERICAN HOME ASSURANCE CO.
mitigate the running of § 580 interest. We affirm the
Trade Court on all counts.
Customs assesses any duties and fees due for import-
ed merchandise at the time of liquidation, and payment is
due “30 days after issuance of the bill for such payment.”
19 U.S.C. § 1505(b). If the bill is not paid within the 30-
day period, “any unpaid balance shall be considered
delinquent and bear interest by 30-day periods, at a rate
determined by the Secretary, from the date of liquida-
tion . . . until the full balance is paid.” Id. § 1505(d).
Because the statute, titled “Payment of Duties and Fees,”
is directed to the duties and fees due on the merchandise
under bond, id. § 1505(a), the sum of any § 1505(d) inter-
est and any other duties and fees may not exceed the face
amount of the subject bond. In other words, the govern-
ment is entitled to post-liquidation § 1505(d) interest,
which may accrue up to the face amount of the bond,
starting thirty days after Customs issues the first post-
liquidation bill and ending when the full balance is paid
(up to the bond amount). Accord United States v. Am.
Home Assur. Co., 113 F. Supp. 3d 1297, 1310–13 (Ct. Int’l
Trade 2015) (holding surety liable for § 1505(d) interest
up to the face amount of the bond).
The plain terms of § 580 dictate that § 580 interest
may be assessed on the entire bond amount, including
any applicable § 1505(d) interest. The statute states that
interest shall be allowed “upon all bonds” on which the
government must bring suit to recover duties. 19 U.S.C.
§ 580. As we previously recognized, the word “duties”
does not modify “bonds”—the statute calls for interest on
“all bonds” and does not discriminate between duties,
fees, or interest assessed under the bond. AHAC I, 789
F.3d at 1325.
19 U.S.C. § 4401 further reinforces that Congress in-
tended that § 580 apply to all duties, fees, and interest
assessed under the bond. In describing the various types
US v. AMERICAN HOME ASSURANCE CO. 9
of interest earned on antidumping duties, Congress
identified:
Equitable interest under common law and interest
under section 580 of this title awarded by a court
against a surety under its bond for late payment
of antidumping duties, countervailing duties, or
interest [accrued under section 1505(d) of this ti-
tle].
19 U.S.C. § 4401(c)(2)(C) (emphases added). This statute
expressly anticipates that both equitable interest and
§ 580 interest can be earned on, inter alia, antidumping
duties and § 1505(d) interest. We hold that § 580 interest
may be assessed on the bond up to its face value, includ-
ing applicable § 1505(d) interest.
We are not persuaded by AHAC’s argument that the
Trade Court erred in awarding § 580 interest from the
date of the government’s first formal demand for payment
because § 1505(d) interest did not become “legally fixed”
under 19 C.F.R. § 113.62(a)(1)(ii) until Customs denied
AHAC’s protest regarding the § 1505(d) interest. The
plain language of § 580 dictates that § 580 interest is
calculated “from the time when said bonds became due.”
This language is clear and unambiguous. Since “no
interest runs against a surety on the principal amount of
a bond unless requisite notice and demand for payment is
first made,” the time when the bonds became due can be
no earlier than the government’s first formal demand for
payment. United States v. Reul, 959 F.2d 1572, 1581
(Fed. Cir. 1992).
The language of § 113.62(a)(1)(ii) is not to the contra-
ry. Section 113.62 sets forth the basic conditions for a
bond for importation and entry. It does not dictate the
timing when interest must run. It does not mention § 580
or § 1505, nor does it use the word “interest.” And in
context, the regulation states that the surety must “[p]ay,
as demanded by CBP, all additional duties, taxes, and
10 U.S. v. AMERICAN HOME ASSURANCE CO.
charges subsequently found due, legally fixed, and im-
posed on any entry secured by this bond.” 19 C.F.R.
§ 113.62(a)(1)(ii) (emphasis added). Even if we interpret
“legally fixed” to require that AHAC had an opportunity
to protest the charge, this regulation would then merely
require AHAC to pay the charges after its protest was
denied—the regulation does not speak to how to calculate
interest charges.
The language of § 580 is clear. The Trade Court did
not err in holding that § 580 interest runs from the date of
the government’s first formal demand for payment.
AHAC also argues that the Trade Court abused its
discretion by declining to permit AHAC to make a deposit
in an interest-bearing account to mitigate the running of
§ 580 interest and the award of § 580 interest should be
reduced by the amount that would have been earned in
such an account. AHAC disagrees with the Trade Court’s
exercise of its discretion. In denying AHAC’s motion, the
Trade Court articulated a thorough and reasoned analysis
explaining its denial. See United States v. Am. Home
Assur. Co., 6 F. Supp. 3d 1371, 1374 (Ct. Int’l Trade
2014). Nothing more is required. The Trade Court did
not abuse its discretion when it denied AHAC’s motion.
C. § 1505(d) Interest
AHAC argues the Trade Court erred in holding that
AHAC waived its right to contest the award of § 1505(d)
interest because 19 U.S.C. § 1514 applies only to the
importer, not the surety, during liquidation. We do not
agree. We hold that AHAC waived its opportunity to
contest the application of § 1505(d) interest when it failed
to contest Custom’s denial of its protest and pay the
duties and fees owed.
All reviewable determinations and decisions by Cus-
toms relating to liquidation, including “all charges or
exactions of whatever character within the jurisdiction of
US v. AMERICAN HOME ASSURANCE CO. 11
the Secretary of the Treasury,” are final and conclusive
unless a protest is filed “or unless a civil action contesting
the denial of a protest” is filed at the Trade Court.
19 U.S.C. § 1514(a)–(b). Once final and conclusive, Cus-
toms’ decisions are foreclosed from challenge by any party
in a collection action. United States v. Cherry Hill Tex-
tiles, Inc., 112 F.3d 1550, 1557 (Fed. Cir. 1997) (“The
language of section 1514, that a liquidation will be ‘final
and conclusive’ unless protested, is sufficiently broad that
it indicates that Congress meant to foreclose unprotested
issues from being raised in any context, not simply to
impose a prerequisite to bringing suit. Moreover, we
discern no compelling policy consideration counseling
against giving the statutory language its naturally broad
reading.”).
Challenges to the validity of a liquidation and any
findings related to liquidation are subject to § 1514. St.
Paul Fire & Marine Ins. Co. v. United States, 959 F.2d
960, 963 (Fed. Cir. 1992) (“[A] surety may protest the
government’s demand for payment on its bond provided it
files such protest within 90 days of the demand. 19
U.S.C. § 1514(c).”); Cherry Hill, 112 F.3d at 1557 (“[T]he
issue of the correctness and validity of the liquidation is
‘final and conclusive’ for purposes of the collection action
when the liquidation has not been protested in accordance
with the provisions of section 1514.”); Volkswagen of Am.,
Inc. v. United States, 532 F.3d 1365, 1370 (Fed. Cir. 2008)
(“[T]he language of § 1514 establishes liquidation as a
final challengeable event in Customs’ appraisal process.
Findings related to liquidation—including valuation—
merge with the liquidation.”). The finality of liquidation
under § 1514 is applicable to importer and surety alike.
See 19 C.F.R. § 113.62(a)(1)(ii) (surety must agree to joint
and several liability with importer to “[p]ay, as demanded
by CBP, all additional duties, taxes, and charges subse-
quently found due, legally fixed, and imposed on any
entry secured by this bond”); United States v. Utex Int’l
12 U.S. v. AMERICAN HOME ASSURANCE CO.
Inc., 857 F.2d 1408, 1412 (Fed. Cir. 1988) (“The importer,
the surety, and the government are bound by and have
the right to rely on the finality of liquidation.”); Cherry
Hill, 112 F.3d at 1556 (stating that our case law, which
carves out some exceptions, does not stand for the “sweep-
ing proposition that a surety is not bound by unprotested
liquidations”).
There is no question that § 1505(d) interest is a
“charge[] or exaction[] of whatever character within the
jurisdiction of the Secretary of the Treasury.” 19 U.S.C.
§ 1514(a)(3); accord N. Z. Lamb Co. v. United States, 40
F.3d 377, 382 (Fed. Cir. 1994) (“We start from the premise
that interest on the underpayment of duties is a charge
‘within the jurisdiction of the Secretary of the Treasury,’
19 U.S.C. § 1514(a)(3).”). The statutory price for delin-
quency of payment of the duties and fees determined at
liquidation is specified by § 1505(d). Section 1505(d)
interest is a straightforward sum that is calculated in the
event that the duties and fees at liquidation are not paid
in a timely manner. That § 1505(d) interest must inher-
ently be assessed after liquidation (since the surety and
importer must have failed to pay the duties and fees
assessed at liquidation) changes nothing about the nature
of the charge. And as the Trade Court correctly recog-
nized, § 1514 does not distinguish between charges and
exactions arising after liquidation or on particular kinds
of duties.
AHAC points to no authority that justifies creating a
distinction between an importer’s and a surety’s obliga-
tion to protest Customs’ notification that it was charging
§ 1505(d) interest. We have acknowledged a surety may
retain the right to assert certain claims or defenses in
some situations not applicable here. See Cherry Hill, 112
F.3d at 1560 (where liquidation is deemed final as a
matter of law and the government later tries to liquidate
the entry anew, the surety is not precluded from using the
deemed liquidation as a shield against an enforcement
US v. AMERICAN HOME ASSURANCE CO. 13
action); St. Paul Fire, 959 F.2d at 963–64 (surety was not
barred under § 1514 from raising claims where it was
discovered, after the protest period, that the importer was
engaged in fraudulent conduct); Utex, 857 F.2d at 1413–
14 (surety was not barred under § 1514 from raising
defenses for liability for failure to export merchandise as
demanded by Customs four years after liquidation).
Once Customs notified AHAC that it was denying its
protest, the contest period to commence an action at the
Trade Court began running. 28 U.S.C. §§ 1581(a),
2636(a). AHAC chose not to exercise its right to contest
Customs’ decision to deny the protest and Customs’
decision thereby became final and conclusive under 19
U.S.C. § 1514(a). We hold that pursuant to § 1514(a),
AHAC waived the right to appeal the application of
§ 1505(d) interest by failing to challenge its liability
below.
CONCLUSION
For the foregoing reasons, we affirm the Trade Court’s
judgment. The Trade Court did not abuse its discretion in
declining to award the government equitable prejudgment
interest on top of § 580 interest or in declining to permit
AHAC to make a deposit in an interest-bearing account.
We affirm the Trade Court’s award of § 1505(d) interest
up to the face amount of the bonds, beginning from the
date of Customs’ first demand, and the award of § 580
interest. Finally, we affirm the Trade Court’s determina-
tion that AHAC is precluded from asserting defenses to
its liability for § 1505(d) interest because it failed to
contest the liability at the Trade Court during the statu-
tory protest period.
AFFIRMED
COSTS
No costs.