United States v. Greenlight Organic, Inc. , 352 F. Supp. 3d 1312 ( 2018 )

Slip Op. 18-
UNITED STATES COURT OF INTERNATIONAL TRADE
UNITED STATES,
Plaintiff,
Before: Jennifer Choe-Groves, Judge
v.
Court No. 17-00031
GREENLIGHT ORGANIC, INC.,
Defendant.
OPINION AND ORDER
[Denying Defendant’s motion for summary judgment.]
Dated: November 29, 2018
William G. Kanellis and Kelly A. Krystyniak, Attorneys, Commercial Litigation Branch, Civil
Division, U.S. Department of Justice, of Washington, D.C., for Plaintiff United States. With
them on the brief were Chad A. Readler, Acting Assistant Attorney General, Jeanne E.
Davidson, Director, and Patricia M. McCarthy, Assistant Director.
Peter S. Herrick, Peter S. Herrick, P.A., of St. Petersburg, FL, Joshua A. Levy, Kennedys CMK,
LLP, of Miami, FL, and Frances P. Hadfield, Crowell & Moring, LLP, of New York, N.Y., for
Defendant Greenlight Organic, Inc.
Choe-Groves, Judge: This action comes before the court under 19 U.S.C. § 1592 (2012)
for fraud in the course of importing merchandise into the commerce of the United States. Before
the court is a motion for summary judgment brought by Defendant Greenlight Organic, Inc.
(“Greenlight”) against Plaintiff United States (“Government”). See Def.’s Mot. Summ. J., July
9, 2018, ECF No. 89; see also Mem. L. Supp. Def.’s Mot. Summ. J., July 9, 2018, ECF No. 89
(“Def.’s Mem.”). Greenlight asserts that the Government’s action is time-barred by the five-year
statute of limitations set forth in 19 U.S.C. § 1621 because the Government became aware of
Court No. 17-00031 Page 2
Greenlight’s fraudulent activities in 2011, more than five years before filing the summons and
complaint in this case. See Def.’s Mem. 1. Plaintiff has filed a response in opposition to
Defendant’s motion. See The United States’ Opp’n Def.’s Mot. Summ. J., Aug. 20, 2018, ECF
No. 93. The Government contends that the statute of limitations began to run in February 2012
when the Government first obtained double-invoicing records from Greenlight. See id. at 1–2.
For the following reasons, the court concludes that there are insufficient undisputed facts for the
court to determine when the Government first discovered Greenlight’s fraudulent activities for
the purposes of 19 U.S.C. § 1621 at this stage of the proceedings. Greenlight’s Motion for
Summary Judgment is denied, and this issue is reserved for trial.
UNDISPUTED FACTS
The following facts are not in dispute. The United States initiated this action on behalf of
U.S. Customs and Border Protection (“Customs”). See The United States’ Rule 56.3 Statement
of Issues of Material Fact 1, Aug. 20, 2018, ECF No. 93 (“Pl.’s Facts”); Def.’s Resp. to the
United States’ Rule 56.3 Statement of Issues of Material Fact 1, Sept. 4, 2018, ECF No. 95
(“Def.’s Facts Resp.”). Defendant Greenlight imports products including athletic apparel and is
owned by Parambir “Sonny” Aulakh. See Pl.’s Facts 1; Def.’s Facts Resp. 1–2.
The Government filed a civil complaint against Greenlight on February 8, 2017. See
Pl.’s Facts 11; Def.’s Facts Resp. 20. The complaint sought the following relief: (1) the amount
of “approximately $238,516.57 in unpaid duties and fees, pursuant to 19 U.S.C. § 1592(d), plus
interest,” and (2) “a penalty for fraud, pursuant to 19 U.S.C. § 1592(c)(1) in the amount of
approximately $3,232,032, stemming from Greenlight’s violations of 19 U.S.C. § 1592(a)
relating to approximately 122 entries of wearing apparel.” See Pl.’s Facts 11; Def.’s Facts Resp.
Court No. 17-00031 Page 3
20. Greenlight denied liability under 19 U.S.C. § 1592 in its Answer. See Pl.’s Facts 12; Def.’s
Facts Resp. 21. Greenlight pled further that the Government’s action for fraud in this case was
time-barred because the statute of limitations expired before the Government filed the action.
See Pl.’s Facts 12; Def.’s Facts Resp. 22.
JURISDICTION AND STANDARD OF REVIEW
The court has jurisdiction over the underlying action pursuant to 28 U.S.C. § 1582. The
court will grant summary judgment if the movant shows that there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a matter of law. USCIT R. 56(a). To
raise a genuine issue of material fact, a party cannot rest upon mere allegations or denials and
must point to sufficient supporting evidence for the claimed factual dispute to require resolution
of the differing version of the truth at trial. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248–49 (1986); Barmag Barmer Maschinenfabrik AG v. Murata Mach., Ltd., 731 F.2d 831, 835–
36 (Fed. Cir. 1984).
ANALYSIS
The Government filed its Complaint in this matter on February 8, 2017 alleging
fraudulent misclassification and undervaluation. In pertinent part, 19 U.S.C. § 1592(a)(1) states:
Without regard to whether the United States is or may be deprived of all or a portion
of any lawful duty thereby, 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, 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). To prove a fraudulent violation of the statute, Plaintiff must establish,
Court No. 17-00031 Page 4
by clear and convincing evidence, that Greenlight (1) deliberately introduced merchandise into
the commerce of the United States by means of material false statements, acts or omissions; and
(2) intended to defraud the revenue or otherwise violate the laws of the United States. See 19
U.S.C. § 1592(a)(1), (e)(2); United States v. Inn Foods, Inc., 31 CIT 1474, 1484, 515 F. Supp. 2d
1347, 1357 (2007).
A statute of limitations imposes a time limit for suing in a civil case, which is based on
the date when the claim accrued. CTS Corp. v. Waldburger, 134 S. Ct. 2175, 2182 (2014). A
statute of limitations requires a plaintiff to pursue diligent prosecution of known claims and
promotes justice by preventing surprises through plaintiff’s “revival of claims that have been
allowed to slumber until evidence has been lost, memories have faded, and witnesses have
disappeared.” Id. at 2183 (citing R.R. Telegraphers v. Ry. Express Agency, Inc., 321 U.S. 342,
348–49 (1944)).
In actions alleging fraud under 19 U.S.C. § 1592, the statute sets forth a five-year statute
of limitations for initiating a case before the Court:
No suit or action to recover any duty under section 1592(d) . . . of this title . . . shall
be instituted unless such suit or action is commenced within five years after the
time when the alleged offense was discovered . . . except that--
(1) in the case of an alleged violation of section 1592 . . . 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.
19 U.S.C. § 1621 (emphasis added). The language “within 5 years after the date of discovery of
fraud” invokes the discovery rule, which tolls the statute of limitations period until the date
when the plaintiff first learns of the fraud. United States v. Spanish Foods, Inc., 24 CIT 1052,
Court No. 17-00031 Page 5
1056, 118 F. Supp. 2d 1293, 1297 (2000) (citing United States v. Ziegler Bolt & Parts Co., 19
CIT 13, 17 (1995); United States v. Modes Inc., 16 CIT 879, 887, 804 F. Supp. 360, 368
(1992)). Determining when a statute of limitations begins to run is a fact-specific inquiry.
Spanish Foods, 24 CIT at 1056, 118 F. Supp. 2d at 1297–98. The question of when a plaintiff
discovered fraud is not one that often lends itself to resolution by way of summary judgment.
Here, genuine issues of material fact exist as to when the Government first discovered
the fraudulent misclassification and undervaluation. The record on summary judgment does not
provide the court with enough information to assess when the Government first had knowledge
of Greenlight’s fraudulent activities. For example, the record does not demonstrate clearly
whether the Government had knowledge of Greenlight’s intent to defraud the revenue or
otherwise violate the laws of the United States when the Government discovered Greenlight’s
misclassification of its entries in 2011. More facts are needed to ascertain when the
Government first had knowledge of Greenlight’s fraudulent misclassification and
undervaluation activities, including when the Government began to suspect a potential double-
invoicing scheme and when the Government had knowledge of an intent to defraud with respect
to the misclassification of entries. Because more facts are necessary to determine when the
Government gained knowledge of the specific causes of action alleged against Greenlight, the
court is unable to determine on summary judgment whether Plaintiff initiated this case outside
of the statute of limitations period permitted in 19 U.S.C. § 1621. The court denies Defendant’s
Motion for Summary Judgment. The Parties may present evidence on this issue at trial.
Court No. 17-00031 Page 6
CONCLUSION
Accordingly, upon consideration of Defendant’s Motion for Summary Judgment, and all
other papers and proceedings in this action, it is hereby
ORDERED that Defendant’s motion is denied.
/s/ Jennifer Choe-Groves
Jennifer Choe-Groves, Judge
Dated: November 29, 2018
New York, New York