Shah Bros., Inc. v. United States , 953 F. Supp. 2d 1328 ( 2013 )

Slip Op. 13 - 157
UNITED STATES COURT OF INTERNATIONAL TRADE
SHAH BROS., INC.,
Plaintiff,
Before: Donald C. Pogue,
v. Chief Judge
UNITED STATES, Court No. 10-00205
Defendant.
OPINION AND ORDER
[granting defendant’s motion for entry of judgment in favor of
the plaintiff and dismissing as moot plaintiff’s motion to
compel discovery]
Dated: December 27, 2013
Elon A. Pollack, Bruce N. Shulman, and Juli C.
Schwartz, Stein Shostak Shostak Pollack & O’Hara, of Los
Angeles, CA, for the Plaintiff.
Edward F. Kenny, Commercial Litigation Branch, Civil
Division, U.S. Department of Justice, of New York, NY, for the
Defendant. Also on the briefs were Stuart F. Delery, Assistant
Attorney General, and Amy M. Rubin, Acting Assistant Director,
International Trade Field Office.
Pogue, Chief Judge: In this action, Plaintiff Shah
Bros., Inc. (“Shah Bros.”) – an importer of a smokeless tobacco
product from India called “gutkha” – challenges the
classification of its merchandise by U.S. Customs and Border
Protection (“Customs”) as “snuff” rather than “chewing tobacco.”
Defendant United States (“the Government”) has moved to confess
Court No. 10-00205 Page 2
judgment in favor of Shah Bros., reliquidate the entry at issue
as chewing tobacco, and refund to Shah Bros. all excess duties
and taxes paid, along with lawful interest.1 Shah Bros. opposes
the Government’s motion, seeking to litigate its claim for
declaratory and injunctive relief regarding the Government’s
decision-making process, in hopes of establishing grounds for
future issue preclusion.2 As explained below, because the
Government’s agreement to provide all legally available relief
to Shah Bros. both ends the concrete controversy between the
parties and provides the Plaintiff with all available redress,
Shah Bros.’ claim regarding the Government’s decision-making
methodology is no longer justiciable. Accordingly, the
Government’s motion for an entry of judgment in the Plaintiff’s
favor is granted, judgment shall be so entered, and Shah Bros.’
outstanding motion to compel discovery3 is dismissed as moot.
DISCUSSION
Customs classified Plaintiff’s merchandise – as
“snuff” – under Subheading 2403.99.2040 of the Harmonized Tariff
1
Def.’s Mot. for Entry of Confession of J. in Pl.’s Favor,
ECF No. 81 (“Def.’s Mot. to Confess J.”).
2
Pl.’s Opp’n to Def.’s Mot. for Entry of Confession of J. in
Pl.’s Favor, ECF No. 89 (“Pl.’s Resp. to Def.’s Mot. to Confess
J.”).
3
[Pl.’s] Mot. to Compel Disc., ECF No. 65.
Court No. 10-00205 Page 3
Schedule of the United States (“HTSUS”).4 In protesting this
classification, Shah Bros. contends that the merchandise should
have been classified as “chewing tobacco” under HTSUS Subheading
2403.99.2030.5 The Government now agrees. Def.’s Mot. to Confess
J. at 2. Accordingly, no live case or controversy remains
regarding the classification, duties, or taxes owed for the
merchandise in question.6 Because this Court decides legal
questions only in the context of actual cases or controversies,7
the Government’s agreement to reliquidate the subject entry as
4
See Am. Compl. ¶ 57.
5
Id. at ¶ 92(a). Classification as “chewing tobacco” rather
than “snuff” does not alter the applicable tariff rate but does
lower the applicable excise tax. See HTSUS 2403.99.20; 26 U.S.C.
§ 5701(e)(1)-(2). The gutkha imported by Shah Bros. “is a
grayish/beige substance consisting of dry rough chunks of betel
nut pieces and bits of tobacco leaf, coated with a powdered
blend of the spices.” Am. Compl. ¶ 36. “Snuff” is defined as
“any finely cut, ground, or powdered tobacco that is not
intended to be smoked,” 26 U.S.C. § 5702(m)(1), whereas “chewing
tobacco” is “any leaf tobacco that is not intended to be
smoked.” Id. at § 5702(m)(3). According to Shah Bros., its
gutkha “is not finely cut, ground or powdered,” and when “the
gutkha is rinsed in a fine mesh strainer, the spice coating is
washed off, and the remaining components, i.e., crushed betel
nut and tobacco leaf, are plainly visible and identifiable as
such.” Am. Compl. ¶ 36.
6
See also Shah Bros., Inc. v. United States, __ CIT __,
770 F. Supp. 2d 1367 (2011) (dismissing Shah Bros.’ additional
claims against the Alcohol and Tobacco Tax and Trade Bureau).
7
See U.S. Const. art. III, § 2; Alvarez v. Smith, 558 U.S. 87,
93 (2009) (holding that an abstract legal dispute regarding the
lawfulness of Governmental procedures “falls outside the scope
of the constitutional words ‘Cases’ and ‘Controversies’” when
such dispute “is no longer embedded in any actual controversy”).
Court No. 10-00205 Page 4
“chewing tobacco” under HTSUS Subheading 2403.99.2030 concludes
this litigation. See, e.g., Atteberry v. United States, 31 CIT
133, 154 (2007) (not reported in the Federal Supplement) (“Where
– as here – the Government is willing to provide all the relief
legally available to Plaintiff by reliquidating Plaintiff’s
merchandise as [requested in the complaint], there is no longer
a case or controversy between the parties . . . .”).
Shah Bros. opposes the entry of judgment in its favor,
seeking to press its challenge to the Government’s legal process
in order to establish grounds for issue preclusion in collateral
or future litigation involving the classification of its
merchandise. See Pl.’s Resp. to Def.’s Mot. to Confess J. But
because the Government has agreed to reliquidate the merchandise
at the tariff and tax rates requested in Shah Bros.’ amended
complaint, Shah Bros.’ claims regarding the Government’s
methodology for arriving at the initial classification are “no
longer embedded in any actual controversy.” Alvarez, 558 U.S.
at 93. Such claims pose precisely the sort of abstract legal
questions that “fall[] outside the scope of the constitutional
words ‘Cases’ and ‘Controversies.’” Id.8 “If a dispute is not a
8
In any event, “collateral estoppel does not [generally apply
in] successive litigation over the classification of
merchandise, even when the subsequent importations involve the
same issues of fact and the same questions of law.”
DaimlerChrysler Corp. v. United States, 442 F.3d 1313, 1321
(footnote continued)
Court No. 10-00205 Page 5
proper case or controversy, the courts have no business deciding
it, or expounding the law in the course of doing so.”
DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 341 (2006).
Shah Bros. also contends that this case must be
litigated, notwithstanding the Government’s agreement to
reliquidate in accordance with the relief requested, because the
claimed misclassification is “capable of repetition, yet evading
review.” Pl.’s Resp. to Def.’s Mot. to Confess J. at 3 (quoting
Wilsey Foods, Inc. v. United States, 18 CIT 85, 86 (1994) (not
reported in the Federal Supplement)). This phrase is rooted in
a line of cases holding that defendants may not escape judicial
review by engaging in short-term conduct whose effect on would-
be plaintiffs’ rights is irrevocably finalized before litigation
can reach the merits, leaving plaintiffs without any chance of
redress.9 The case relied on by Shah Bros., for example,
(Fed. Cir. 2006) (internal quotation marks, citation, and
footnote omitted). The sole recognized exception to this
principle – applied in granting preclusive effect to a prior
holding that invalidated a Customs regulation, Gulfstream
Aerospace Corp. v. United States, 21 CIT 1083, 1094,
981 F. Supp. 654, 665 (1997) (“To ensure equal treatment to
. . . all importers, the Court finds that the [regulation]
validity issue adjudicated in [a prior case] must be preclusive
against the Customs Service.”) – is not applicable here, though
the policy considerations announced in that decision may be
relevant in the event of another dispute between the parties
regarding the classification of Shah Bros.’ gutkha.
9
See, e.g., Moore v. Ogilvie, 394 U.S. 814, 816 (1969) (holding
that because the burden placed by a State on the nomination of
(footnote continued)
Court No. 10-00205 Page 6
involved the classification and exclusion of perishable
merchandise; when the excluded merchandise spoiled and was
consequently destroyed, the Government argued that there was no
longer a live controversy. Rejecting the Government’s argument,
the court declined to dismiss the case as moot because doing so
would have left the importer without any chance of redress, as
any future excluded merchandise would similarly perish before
the court could rule on the legality of its classification and
exclusion. See Wilsey, 18 CIT at 88.
This is not such a case. Here, a judgment in Shah
Bros.’ favor will ensure that its merchandise is assessed the
tariff and tax rates requested in its amended complaint.10 Shah
Bros. will be refunded all excess duties and taxes paid, along
candidates for statewide offices controlled future elections,
the fact that the election in question had already been held and
could not be redone did not moot an action for declaratory
relief challenging the legality of this burden because “[t]he
problem [was] therefore ‘capable of repetition, yet evading
review’”) (quoting S. Pac. Terminal Co. v. Interstate Commerce
Comm’n, 219 U.S. 498, 515 (1911) (denying motion to dismiss case
as moot after the challenged agency order expired because such
short-term orders are “capable of repetition, yet evading
review,” and because permitting the case to go forward would
prevent a situation where parties “have their rights determined
by the [agency] without a chance of redress”)).
10
Compare Am. Compl. ¶ 92(a) (requesting the court to enter
judgment in Shah Bros.’ favor and hold the imported gutkha to be
chewing tobacco under HTSUS Subheading 2403.99.2030), with
Def.’s Mot. to Confess J. at 2 (moving to confess judgment in
favor of Shah Bros., reliquidate the entry in question, and
refund to Shah Bros. all excess duties and taxes paid along with
lawful interest).
Court No. 10-00205 Page 7
with lawful interest. Contrary to Shah Bros.’ characterization,
terminating this litigation by entering judgment in Shah Bros.’
favor would not “leave the defendant . . . free to return to
[its] old ways.”11 Nor is this a case where litigation on the
merits is necessary to prevent the Government from affecting the
Plaintiff’s rights without a chance for redress. On the
contrary, Shah Bros. will be redressed in full, being refunded
all duties and taxes paid in excess of those owed for
merchandise entered as chewing tobacco. And if or when another
controversy involving the classification of Shah Bros.’
merchandise arises, Shah Bros. is free to litigate the matter
and obtain all redress lawfully available to it.
11
See Pl.’s Resp. to Def.’s Mot. to Confess J. at 3 (quoting
Lizarraga Customs Broker v. Bureau of Customs & Border Prot.,
No. 08-00400, 2010 WL 3859766, at *6 (CIT Oct. 4, 2010) (quoting
Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc.,
528 U.S. 167, 189 (2000) (discussing the well-settled principle
that “a defendant’s voluntary cessation of a challenged practice
does not deprive a federal court of its power to determine the
legality of the practice” unless it is “absolutely clear that
the allegedly wrongful behavior could not reasonably be expected
to recur”) (internal quotation marks and citations omitted))).
Here, the Government is not merely voluntarily ceasing a
challenged practice. It is conceding the case and will be bound
by the judgment against it. As to the Government’s
classification of any future entries of Shah Bros.’ merchandise,
such action may be challenged – and, as appropriate, redressed –
regardless of whether judgment is entered in this case pursuant
to Defendant’s confession thereto or a complete litigation on
the merits. See, e.g., Avenues in Leather, Inc. v. United
States, 317 F.3d 1399, 1403 (Fed. Cir. 2003) (“[E]ach new entry
is a new classification cause of action, giving the importer a
new day in court.”) (citation omitted).
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Accordingly, the Government having agreed to redress the
Plaintiff in full, no controversy or injury remains for the
court to address. Defendant’s motion for entry of judgment in
Plaintiff’s favor must therefore be granted and Plaintiff’s
motion to compel discovery must be dismissed as moot.
CONCLUSION
As explained above, because the Government has agreed to
provide all the relief that is legally available to Shah Bros. –
by reliquidating the merchandise in question at the tariff and
tax rates claimed in the amended complaint – no live controversy
remains between the parties. Absent a live controversy, this
Court will not rule on an abstract question regarding the
lawfulness of the Government’s methodology for classifying the
merchandise that it has now agreed to reclassify. Accordingly,
judgment shall be entered for the Plaintiff. Plaintiff’s
outstanding motion to compel discovery is dismissed as moot.
It is SO ORDERED.
____/s/ Donald C. Pogue_____
Donald C. Pogue, Chief Judge
Dated: December 27, 2013
New York, NY