Warner-Lambert Co. v. United States ( 2000 )

Slip Op. 00 - 34
UNITED STATES COURT OF INTERNATIONAL TRADE
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WARNER-LAMBERT COMPANY, :
Plaintiff, :
v. : Court No. 00-01-00001
:
THE UNITED STATES; AMERICAN MOTORISTS
INSURANCE COMPANY and C.A. SHEA & COM-:
PANY,
:
Defendants.
:
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Memorandum
[Application(s) for preliminary injunction denied;
motion of defendant United States to dismiss granted.]
Decided: April 4, 2000
Rode & Qualey (Patrick D. Gill and Eleanore Kelly-Kobayashi)
for the plaintiff.
David W. Ogden, Acting Assistant Attorney General; Joseph I.
Liebman, Attorney in Charge, International Trade Field Office,
Commercial Litigation Branch, Civil Division, U.S. Department of
Justice (James A. Curley); and Office of Assistant Chief Counsel,
U.S. Customs Service (Jeffrey E. Reim), of counsel, for defendant
United States.
Grunfeld, Desiderio, Lebowitz & Silverman LLP (Edward B. Ack-
erman, Laurence M. Friedman and Michael T. Cone) for defendant
American Motorists Insurance Company.
Law Offices of Michael P. O'Connor (Michael P. O'Connor) for
defendant C.A. Shea & Company.
AQUILINO, Judge: The plaintiff commenced this action
with the simultaneous filing of a summons and complaint, plus
an application for a temporary restraining order and preliminary
Court No. 00-01-00001 Page 2
injunction, averring, among other things, that the U.S. Customs
Service had recently
threatened to impose sanctions against plaintiff
which would include, inter alia, the loss of im-
mediate delivery privileges for all merchandise
imported into the United States. Such action
would have a detrimental impact on the company,
one of the largest pharmaceutical manufacturers
in the United States and the world. As is attest-
ed to in . . . the affidavit . . . attached to
the Application for a Temporary Restraining Order
and Order to Show Cause . . ., the imposition of
sanctions is imminent.1
Government counsel were afforded an immediate opportunity to
dispel the actuality of such a threat. When they proved, at
first blush, unable to do so, this court granted the requested
temporary restraining order, which the government then formal-
ly moved to extend, pending presentation of all the facts and
circumstances underlying this action and its resolution by the
court.
I
At its commencement, the plaintiff purported to be in
the middle of an "ongoing dispute" with Customs over the proof
necessary to satisfy the Service that pharmaceuticals imported
for clinical and laboratory testing under subheading 9813.00.30
of the Harmonized Tariff Schedule of the United States had been
exported or destroyed so as to satisfy the conditions of the
1
Memorandum in Support of Motion for a Preliminary Injunc-
tion, pp. 1-2 (emphasis in original).
Court No. 00-01-00001 Page 3
bond(s) posted in regard thereto.2 The verified complaint posits
administrative cases 1996-3801-02071401, 1997-3801-00350501,
1998-3801-20027401, 1998-3801-20028001, 1998-3801-20045401,
1998-3801-20078601, 1998-3801-20102601, 1998-3801-20146601,
1998-3901-20099101, 1998-3801-20254401, 1998-3801-20222901,
1998-3801-20289201, 1999-2304-20109801, 1999-4601-20208501, and
1999-3801-20235801 as involving claims for liquidated damages
against the plaintiff.
At the hearing held in open court on plaintiff's ap-
plication for a preliminary injunction, the government presented
evidence as to each of the afore-numbered matters, essentially
via Customs Service Fines, Penalties & Forfeitures officers
("FPFO") from the ports of Detroit, Michigan and Laredo, Texas.
The former considers the cases bearing the eight-digit suffixes
00350501, 20099101, 20254401, 20289201 and 20208501 to be closed.
See Declaration of Darrell E. Woodard, paras. 10, 34, 17, 19,
35. With regard to those matters partially numbered 20078601,
20102601, 20222901 and 20235801, it is reported that Customs
had claimed liquidated damages in each,
alleging a breach of a [Temporary Importation Bond or]
TIB . . . due to Warner-Lambert's failure to 1) export
or destroy the imported merchandise prior to expira-
2
Id. at 1. American Motorists Insurance Company ("AMICO")
and C.A. Shea & Company have been alleged to be plaintiff's
surety and its agent, respectively, and to be indispensable
to maintenance of the status quo herein, ergo their impleading
as parties defendant and coverage by the requested injunctive
relief.
Court No. 00-01-00001 Page 4
tion of the bond period, and/or 2) provide timely proof
to Customs [in regard thereto3,]
that the plaintiff importer has filed petitions for relief
therein, and that the Service has yet to resolve any of them.
See id., paras. 14, 15, 18, 20, 25. In matter 20146601, in-
volving a claim for $4,080.00, a petition was filed, which led
to reduction of that amount to $100, albeit as yet unpaid by
the plaintiff and thereby deemed delinquent by Customs. See
id., para. 16. Petitions were also filed in cases 02071401,
20027401, 20028001 and 20045401. Each was denied, and the
Service takes the position that liquidated damages are due and
owing.4
Finally, according to the Laredo FPFO, the bond period
in matter 20109801
expired on January 19, 1999. Warner-Lambert and AMICO
have submitted no documentation to Customs to cancel
this bond nor . . . petitioned for relief. This claim
is now considered delinquent.
Declaration of Charles E. Dickinson, para. 8. Nonetheless, this
declarant further swears as follows:
10. The claim referenced in paragraph 8 above has not
been referred to the Department of Justice for initia-
tion of collection actions.
* * *
12. To date, importer sanction proceedings have not
been initiated by Customs in connection with this de-
3
Declaration of Darrell E. Woodard, para. 21.
4
See id., para. 9 and U.S. Defendant's Exhibit B-2; para.
11 and U.S. Defendant's Exhibit C; para. 12 and U.S. Defendant's
Exhibit D; para. 13 and U.S. Defendant's Exhibit E.
Court No. 00-01-00001 Page 5
linquent claim. In that regard, notification of pro-
posed sanctions has not been issued to Warner-Lambert.
In addition, importer sanctions will not be initiated
in the future in connection with this claim.
13. As FPFO for the Port of Laredo, I have not ini-
tiated surety sanction procedures against AMICO in
connection with the delinquent claim referenced in
paragraph 8 above. Specifically, a "Preliminary Show
Cause" notification has not been issued to AMICO in
connection with this delinquent claim.
Id., paras. 10, 12, 13.
The Detroit FPFO makes similar representations with
regard to the five numbered claims, supra, deemed now delinquent
by him, e.g.:
To date, importer sanction proceedings have not been
initiated by Customs in connection with these five
claims. In that regard, notification of proposed
sanctions . . . has not been issued to Warner-Lambert.
In addition, importer sanctions will not be initiated
in the future in connection with these five claims.
Declaration of Darrell E. Woodard, para. 30(f). As for the
surety, he declares:
. . . I have not initiated [] surety sanction proced-
ures against AMICO . . . in connection with the five
delinquent claims referenced . . . above. Specifically,
a "Preliminary Show Cause" notification . . . has not
been issued to AMICO in connection with these five de-
linquint claims.5
5
Id., para. 33. Nevertheless, the plaintiff has brought
to the court's attention that, just prior to this declaration
and its submission at the hearing, a Customs Notice of Penalty
or Liquidated Damages Incurred and Demand for Payment had indeed
issued to AMICO on Form 5955A in the amount of $28,912.96 for
case 1998-3801-20102601. On the other hand, letters from govern-
ment counsel and Mr. Woodard dated March 3 and 6, 2000, respect-
ively, advise that the aforesaid demand in the latter's name had
been "sent in error" and thus been rescinded. Cf. Defendant AM-
ICO's Answer and Counterclaim, para. 44 and Exhibit C.
Court No. 00-01-00001 Page 6
Given these representations on the record, the court
no longer can discern the kind of threat of immediate, irrepa-
rable injury necessary to grant or to sustain the extraordinary
equitable relief that is a temporary restraining order or pre-
liminary injunction. And this and other courts have long held
that failure to show such threat is ground itself to deny that
relief, whatever an applicant's showing with regard to likeli-
hood of success on the merits, the public interest, and the
balance of harm among the parties6. See, e.g., American Steve-
6
The court notes in passing that defendant AMICO has inter-
posed an answer to plaintiff's complaint alleging, among other
things:
50. It is beyond dispute that Customs has de-
manded payment from AMICO on the bonds.
51. It is beyond dispute that Warner-Lambert
executed [an] indemnification agreement whereby it
promised to post collateral security upon proof of a
demand by Customs.
52. Warner-Lambert's challenge to Customs' demand
has no bearing on determining Warner-Lambert's obliga-
tion to place sufficient funds with AMICO, as it is
irrelevant whether Warner-Lambert believes AMICO will
ultimately be liable for the demands asserted by Cus-
toms. In fact, it is this very uncertainty which the
collateral security clause is meant to address.
* * *
56. The language of the indemnity agreement is
clear and unequivocal: Warner-Lambert is required to
indemnify AMICO for "any and all liability, claim, de-
mand, loss, damage, expense, cost and attorney's fees
which it shall at any time incur by reason of its exe-
cution of any bond or its payment of or its liability
to pay any claim . . ." (emphasis added).
Whereupon AMICO prays for entry of judgment in its favor, while
at the same time joining in plaintiff's application for a pre-
(footnote continued)
Court No. 00-01-00001 Page 7
doring, Inc. v. U.S. Customs Service, 18 CIT 331, 335, 852 F.
Supp. 1067, 1071 (1994), and cases cited therein.
II
In addition to opposing injunctive relief, the govern-
ment has interposed a motion to dismiss the complaint on the
grounds of lack of subject-matter jurisdiction, mootness, and
failure to exhaust administrative remedies.
Of course, matters that are moot do not entail any live
case or controversy within the meaning of Article III of the U.S.
Constitution, leaving federal courts organized thereunder with no
liminary injunction against Customs -- drawn to protect its in-
terests as surety. It states, in part, that this
measure is warranted because it will relieve AMICO of
the threat of irreparable economic harm if it is sanc-
tioned, as well as the threat of a lengthy and costly
administrative proceeding, the existence and outcome
of which could be highly prejudicial to the company's
business and reputation.
Defendant AMICO's Response to Plaintiff's Motion for a Prelimi-
nary Injunction, p. 4. But economic injury is not necessarily
"irreparable". See, e.g., American Stevedoring, Inc. v. U.S.
Customs Service, 18 CIT 331, 335, 852 F.Supp. 1067, 1071 (1994),
citing Sampson v. Murray, 415 U.S. 61 (1974); Wisconsin Gas Co.
v. Federal Energy Regulatory Comm'n, 758 F.2d 669 (D.C. Cir.
1985); Arbor Foods, Inc. v. United States, 8 CIT 355, 600 F.Supp.
217 (1984).
The answer filed on behalf of defendant C.A. Shea & Company
avers that the plaintiff has failed to state a claim upon which
relief can be granted since the company is not a proper party to
this action. That is, the company's executive vice-president at-
tests that, contrary to plaintiff's pleadings, C.A. Shea is not
an agent of AMICO and "does not sign, execute or bind and bond
on behalf of any surety company." Affidavit of Lee V. Barther,
paras. 3, 4. See Defendant AMICO's Response to Plaintiff's Mo-
tion for a Preliminary Injunction, p. 9 ("AMICO has no objection
to C.A. Shea & Company being dismissed from the instant action").
Court No. 00-01-00001 Page 8
authority to act in regard thereto. See generally Warth v. Sel-
din, 422 U.S. 490 (1975), and cases cited therein. According to
the record now developed herein, the administrative cases num-
bered 1997-3801-00350501, 1998-3901-20099101, 1998-3801-20254401,
1998-3801-20289201, and 1999-4601-20208501 are apparently closed
and thus moot.
On the other hand, the report of Customs at bar is
that the matters numbered 1998-3801-20078601, 1998-3801-20102601,
1998-3801-20222901, and 1999-3801-20235801 involve petitions
still under active agency consideration, which status implicates
the constitutional doctrine of ripeness under Article III. That
is, in general, only ripe matters should be heard and decided
by federal courts.7 Indeed, Congress, in the exercise of its
authority under that article, has provided in its Customs Courts
Act of 1980 that, in an unspecified action like this, "the Court
of International Trade shall, where appropriate, require the
exhaustion of administrative remedies." 28 U.S.C. §2637(d). As
has been pointed out, the purpose of this authority
is to protect courts from premature involvement in
administrative proceedings, and to protect agencies
"from judicial interference until an administrative
decision has been formalized and its effects felt in
a concrete way by the challenging parties."
7
See, e.g., Cedars-Sinai Med. Ctr. v. Watkins, 11 F.3d
1573, 1580 (Fed.Cir. 1993), cert. denied, 512 U.S. 1235 (1994).
Administrative case 1998-3801-20146601, mitigated to the as-yet-
unpaid $100, implicates another well-established principle, name-
ly, de minimis non curat lex. See, e.g., Wisconsin Dep't of Re-
venue v. Wm. Wrigley, Jr., Co., 505 U.S. 214, 231-32 (1992); U-
nited States v. Cavalier Shipping Co., 60 CCPA 152, C.A.D. 1103,
478 F.2d 1256 (1973).
Court No. 00-01-00001 Page 9
Intercargo Ins. Co. v. United States, 19 CIT 1435, 1437, 912 F.
Supp. 544, 546 (1995), aff'd, 129 F.3d 135 (Fed.Cir. 1997), quo-
ting Abbott Laboratories v. Gardner, 387 U.S. 136, 148-49 (1967).
In light of the record now established, the court
finds it appropriate that the plaintiff be required to exhaust
fully its administrative remedies. The finding applies to all
those aforenumbered matters not administratively moot or judi-
cially ripe, which leaves only cases numbered 1996-3801-02071401,
1998-3801-20027401, 1998-3801-20028001, 1998-3801-20045401, and
1999-2304-20109801 open for any further discussion, given the
representations, supra, that Customs considers the claims there-
in due and owing. In fact, plaintiff's application for injunc-
tive relief itself
concedes that the claim made in . . . Case No. 1999-
2304-20109801[] was properly made because the material
was not exported or destroyed within the required time.
The liquidated damages in the amount of $11,046.58 is
[sic] being tendered to Customs.
Affidavit of Thomas Czubak, para. 13. See Plaintiff's Complaint,
para. 15. With regard to the other four matters, the primary con-
cern, as sworn to by the plaintiff in its complaint, is stated to
be as follows:
30. The imposition of sanctions on plaintiff
while the challenge to the liquidated damages asess-
ments are [sic] pending in the Court of International
Trade would have a severe disruptive effect on plain-
tiff's importing operations and testing facilities.
31. Plaintiff is one of the largest pharmaceuti-
cal manufacturers in the United States, and the world,
Court No. 00-01-00001 Page 10
and must be able to promptly and efficiently test ex-
perimental drugs on a continuing basis; the imposition
of sanctions would have a detrimental impact on all of
plaintiff's entries, which number in the thousands ann-
ually.
32. The imposition of sanctions against plaintiff
would interrupt the continuing manufacturing and supply
of its pharmaceutical and non-prescription drug prod-
ucts and potentially limit or prevent their availabil-
ity to patients and consumers who use them.
See Affidavit of Thomas Czubak, paras. 26-28. See also id.,
paras. 5, 16; Plaintiff's Complaint, paras. 5, 6. But Customs
now denies any intent to seek sanctions8 as to the claims deemed
delinquent. See Declaration of Darrell E. Woodard, para. 30(f),
supra.
This disclaimer thus raises the necessary question as
to what, if any, actionable injury is being suffered by the
plaintiff, which like any other federal complainant, must allege
"personal injury fairly traceable to the defendant's allegedly
unlawful conduct and likely to be redressed by the requested
relief." Allen v. Wright, 468 U.S. 737, 751 (1984), citing Val-
ley Forge Christian College v. Americans United for Separation
of Church and State, Inc., 454 U.S. 464, 472 (1982). See Friends
of the Earth, Inc. v. Laidlaw Environmental Servs. (TOC), Inc.,
120 S.Ct. 693, 704 (2000):
8
The court notes in passing that one of plaintiff's ethi-
cal pharmaceutical products singled out in its motion papers
as possibly threatened by the government, namely, Rezulin® (tro-
glitazone), is now being removed from the market, albeit on
grounds not related hereto. See F.D.A. Withdraws Drug for Dia-
betics, Citing Health Risks, N.Y. Times, March 22, 2000, at A1,
col. 1.
Court No. 00-01-00001 Page 11
In Lujan v. Defenders of Wildlife, 504 U.S. 555,
560-561 . . . (1992), we held that, to satisfy Article
III's standing requirements, a plaintiff must show (1)
it has suffered an "injury in fact" that is (a) con-
crete and particularized and (b) actual or imminent,
not conjectural or hypothetical; (2) the injury is
fairly traceable to the challenged action of the de-
fendant; and (3) it is likely, as opposed to merely
speculative, that the injury will be redressed by a
favorable decision.
Here, this court cannot, and therefore does not, conclude that
the plaintiff now satisfies these requirements for proceeding
with this action. Cf. Intercargo Ins. Co. v. United States, 19
CIT 1435, 912 F.Supp. 544 (1995), aff'd, 129 F.3d 135 (Fed.Cir.
1997).
Of course, this conclusion does not leave Warner-
Lambert without any judicial remedy. Indeed, as the plaintiff
itself points out, in United States v. Utex Int'l Inc., 857 F.2d
1408, 1414 (Fed.Cir. 1988), the court held that it was unneces-
sary for a surety to pay liquidated damages and then file a pro-
test thereof under 19 U.S.C. §1514 before defending itself in a
collection action brought against it by Customs pursuant to 28
U.S.C. §1582. That is, as subsequently explained in United
States v. Toshoku America, Inc., 879 F.2d 815, 818 (Fed.Cir.
1989), proof that an importer has complied with the terms and
conditions of its bond "has traditionally been and still remains
a complete defense to a collection suit brought on the bond",
with the court of appeals professing to have held in Utex that
"an assessment of liquidated damages is not a 'charge or exac-
Court No. 00-01-00001 Page 12
tion' that must be challenged by protest under 19 U.S.C. §
1514".
III
Whether or not the grant of temporary equitable relief
to date has aided in sorting out the parties' differences, or
allayed genuine concerns the plaintiff may have had with regard
to its enumerated experimental cases and its worldwide business,
the court in the light of the foregoing facts and circumstances
is required now to deny the application(s) for a preliminary
injunction and to grant the U.S. defendant's motion to dismiss
plaintiff's complaint. Judgment will enter, dismissing this
action in its entirety.9
Decided: New York, New York
April 4, 2000
________________________________
Judge
9
The court notes in passing that, while this dismissal
is not based upon lack of subject-matter jurisdiction under 28
U.S.C. §1581(i), which issue the court has not found necessary
to reach herein, when a main action is dismissed, ancillary
claims without an independent basis of jurisdiction, which is
the case here, also fail. See, e.g., Old Republic Ins. Co. v.
United States, 14 CIT 377, 741 F.Supp. 1570 (1990). Cf. 6 Wright
& Miller, Federal Practice §1433 (1990).