United States v. Millenium Lumber Distribution Co. Ltd. , 899 F. Supp. 2d 1340 ( 2012 )

Slip Op. 12-153
UNITED STATES COURT OF INTERNATIONAL TRADE
________________________________________________
UNITED STATES OF AMERICA, :
Plaintiff, :
v. :
MILLENIUM LUMBER DISTRIBUTION CO. :
LTD. and XL SPECIALTY INSURANCE
COMPANY, :
Defendants. :
________________________________________________________________________________
Court No. 06-00129
XL SPECIALTY INSURANCE COMPANY, :
Cross-Claimant, :
v. :
MILLENIUM LUMBER DISTRIBUTION CO. :
LTD.,
:
Cross-Defendant.
[Defendant Millenium’s Motion for Judgment on the Pleadings is denied]
Dated: December 18, 2012
Aimee Lee, International Trade Field Office, Commercial Litigation Branch, Civil Division,
U.S. Department of Justice, of New York, New York, argued for Plaintiff. With her on the brief
were Tony West, Assistant Attorney General, and Barbara S. Williams, Attorney in Charge,
International Trade Field Office. Of counsel on the brief was Christopher Shaw, Office of the
Assistant Chief Counsel, Bureau of Customs and Border Protection, U.S. Department of Homeland
Security, of New York, New York.
Joel R. Junker, Joel R. Junker & Associates, of Seattle, Washington, argued for Defendant
Millenium Lumber Distribution Co. Ltd. With him on the brief was William N. Baldwin.
Court No. 06-00129 Page 2
OPINION
RIDGWAY, Judge:
The Government commenced this action against defendant Millenium Lumber Distribution
Co. Ltd. and its surety, defendant XL Specialty Insurance Company, to collect more than $1.8
million in liquidated damages. See Complaint ¶¶ 1, 21, 31, 42, 44. According to the Government,
Millenium breached the terms of its customs bonds by not providing required export permits to the
Bureau of Customs and Border Protection.1 See id. ¶¶ 17-20, 28-31, 39-42. The Government claims
that, as a consequence of this alleged breach, Millenium and XL are jointly and severally liable for
liquidated damages. See id. ¶¶ 10-11.
Pending before the Court is Millenium’s Motion for Judgment on the Pleadings, in which
Millenium seeks to dismiss this action for failure to state a claim upon which relief can be granted.
See USCIT Rule 12(b)(5); Defendant Millenium Lumber Distribution Co., Ltd.’s Motion for
Judgment on the Pleadings (“Def.’s Motion to Dismiss”) at 2, 13-14; Supplemental Submission of
Defendant Millenium Lumber Distribution Co., Ltd.’s Motion for Judgment on the Pleadings
(“Def.’s Supp. Brief”) at 1. According to Millenium, the Government “failed to exhaust
administrative remedies” because it brought this action to collect liquidated damages “prior to the
completion of” mitigation proceedings that Millenium maintains were “pending” at the agency level.
Def.’s Motion to Dismiss at 2. Millenium contends that this action is therefore “premature,” and
1
The U.S. Customs Service – formerly part of the U.S. Department of the Treasury – was
transferred to the U.S. Department of Homeland Security as part of the Homeland Security Act of
2002. See Bull v. United States, 479 F.3d 1365, 1368 n.1 (Fed. Cir. 2007). The agency is now
commonly known as U.S. Customs and Border Protection, and is referred to as “Customs” herein.
Court No. 06-00129 Page 3
subject to dismissal. Id.; see also Defendant Millenium Lumber Distribution Co. Ltd.’s Reply to
Plaintiff’s Response to Motion to Dismiss (“Def.’s Reply Brief”) at 3 (explaining that Millenium
“claims that this suit is premature and barred by the doctrine of exhaustion of administrative
remedies”); Def.’s Supp. Brief at 1 (stating that “motion requests dismissal . . . for failure to state
a cause of action upon which relief can be [granted] based on the grounds that this action was
commenced before the conclusion of related administrative proceedings and therefore is in violation
of the doctrine of exhaustion of administrative remedies”).
The Government, in turn, argues that administrative mitigation proceedings are not a
condition precedent to the Government’s institution of a civil action to collect liquidated damages
– particularly “in a situation such as this, where [tariff] classification is contested and the constraint
of [the] statute of limitations would abrogate the Government’s legal right to recover liquidated
damages” if administrative mitigation proceedings were required. See Government’s Opposition
to Defendant’s, Millenium Lumber Distribution Co. Ltd., Motion for Judgment on the Pleadings
(“Pl.’s Response Brief”) at 2-3, 11; see also The Government’s Response to Defendant’s, Millenium
Lumber Distribution Co. Ltd., Supplemental Submission (“Pl.’s Supp. Brief”) at 2, 4, 16. The
Government contends that, in any event, Millenium should not be heard to complain, because – the
Government argues – the company at no time took action to institute mitigation proceedings at the
agency level. See Pl.’s Response Brief at 6, 9-11, 13; Pl.’s Supp. Brief at 14-15.
Jurisdiction lies under 28 U.S.C. § 1582(2) (2000).2 For the reasons outlined below,
2
Except as otherwise indicated, all citations to federal statutes herein are to the 2000 edition
of the United States Code. Similarly, all citations to federal regulations are to the 2000 edition of
the Code of Federal Regulations.
Court No. 06-00129 Page 4
Millenium’s Motion for Judgment on the Pleadings must be denied.
I. Background
Between late April 2000 and early January 2001, Millenium entered 168 entries of certain
softwood lumber products into the United States from Canada. See Complaint ¶¶ 9, 14, 25, 36. The
entries were secured by three bonds issued by Millenium’s surety (XL Specialty Insurance
Company, or its predecessor, Intercargo Insurance Company). See id. ¶¶ 5, 10-11. As a condition
of each bond, Millenium and its surety agreed that they would comply with all customs laws and
regulations. Id. ¶ 11. They also agreed that they would be jointly and severally liable for liquidated
damages in the event of a default. Id.Millenium entered all of the merchandise at issue under heading 4418 of the Harmonized
Tariff Schedule of the United States (“HTSUS”) (2000).3 See Complaint ¶¶ 15, 26, 37. Following
entry, Customs classified the merchandise under HTSUS heading 4407. See id. ¶¶ 16, 27, 38.4
Merchandise falling within heading 4407 is subject to the U.S.-Canada Softwood Lumber
Agreement, and requires export permits issued by the government of Canada for entry into the
United States. See id. ¶¶ 16, 27, 38; 19 C.F.R. § 12.140; 19 C.F.R. § 113.62(k).
Customs issued Notices of Action informing Millenium that the Softwood Lumber
3
Heading 4418 covers “[b]uilders’ joinery and carpentry of wood, including cellular wood
panels and assembled parquet panels; shingles and shakes.” Heading 4418, HTSUS.
All citations to the HTSUS herein are to the 2000 edition, which is identical to the 2001
edition in all relevant respects.
4
Heading 4407 covers “[w]ood sawn or chipped lengthwise, sliced or peeled, whether or not
planed, sanded or finger-jointed, of a thickness exceeding 6mm.” Heading 4407, HTSUS.
Court No. 06-00129 Page 5
Agreement required the company to provide proof of issuance of the requisite export permits and
stating that, absent Millenium’s submission of the necessary documentation, liquidated damages
would be assessed. See Complaint ¶¶ 17-18, 28-29, 39-40; id., Exhs. 5, 11 (Notices of Action, or
“CF-29s”).
Millenium failed to provide Customs with proof of the required permits. Customs therefore
issued Liquidated Damages Notices to Millenium covering all 168 entries. See 19 C.F.R. §
172.1(a)5; Complaint ¶¶ 19-20, 30-31, 41-42; id., Exhs. 6, 9, 12 (three Notices of Penalty or
Liquidated Damages Incurred and Demand for Payment) (“Liquidated Damages Notices,” or “CF-
5955As”). The Liquidated Damages Notices informed Millenium of the amount of liquidated
damages assessed. See Complaint, Exhs. 6, 9, 12. In addition, the Liquidated Damages Notices
advised Millenium of the company’s right to petition Customs for mitigation of the liquidated
damages assessments, as well as the procedure for the filing of such petitions. See id., Exhs. 6, 9,
12. In particular, the Liquidated Damages Notices specified that Millenium had 60 days to pay the
liquidated damages assessments or to file a petition for mitigation with Customs. See id., Exhs. 6,
9, 12.
No petition for mitigation proceedings was ever filed; nor did either Millenium or its surety
5
19 C.F.R. § 172.1(a) provides:
Notice of liquidated damages incurred. When there is a failure to meet the
conditions of any bond posted with Customs, the principal shall be notified in writing
of any liability for liquidated damages incurred by him and a demand shall be made
for payment. The sureties on such bond shall also be advised in writing, at the same
time as the principal, of the liability for liquidated damages incurred by the principal.
19 C.F.R. § 172.1(a).
Court No. 06-00129 Page 6
make any payment on the liquidated damages assessments. See Complaint ¶¶ 22, 33, 44.
In the meantime, Millenium filed protests with Customs contesting the agency’s
classification of the company’s merchandise under HTSUS heading 4407. See Def.’s Motion to
Dismiss at 5 n.1. In two letters (dated August 24, 2001 and October 9, 2001), Customs agreed – at
Millenium’s request – to defer action on the agency’s liquidated damages claims against Millenium
(which arose out of Customs’ classification determination) while the company pursued its challenge
to that determination. See id. at 5-6; id. at Exhs. 1, 3 (Customs letters dated August 24, 2001 and
October 9, 2001).
Customs denied Millenium’s protests, and Millenium brought suit in this court challenging
that denial. See Def.’s Motion to Dismiss at 6; Millenium Lumber Distrib. Ltd. v. United States,
Court No. 02-00595 (filed Sept. 12, 2002). In light of Millenium’s litigation challenging Customs’
classification determination, Customs continued to defer action on the agency’s liquidated damages
claims. However, in late May 2005, with the six-year statute of limitations soon to expire, Customs
notified Millenium and its surety that – although Customs was aware that the classification issue had
not yet been finally resolved, and although the agency would be willing to allow the classification
litigation to run its course – Customs would need to take appropriate action to preserve the agency’s
liquidated damages claims, unless Millenium and/or its surety made full payment or the two
executed waivers of the statute of limitations within 30 days. See Complaint ¶¶ 21, 32, 43; id., Exh.
7 (letters to Millenium and surety, dated May 23, 2005).6
6
A complaint to recover liquidated damages must be filed “within six years after the right
of action accrues or within one year after final decisions have been rendered in applicable
administrative proceedings required by contract or by law, whichever is later.” 28 U.S.C. § 2415(a).
Court No. 06-00129 Page 7
Both Millenium and its surety declined to execute waivers of the statute of limitations.
Similarly, neither made payment of the liquidated damages assessed. See Complaint ¶¶ 22, 33, 44;
Pl.’s Response Brief at 10. Roughly one year later, the Government commenced this action against
Millenium and the surety, to collect the liquidated damages assessed.
In the meantime, Customs’ classification determination has been sustained by this court,
which, in turn, was affirmed on appeal. See Millenium Lumber Distrib. Ltd. v. United States, 31
CIT 575 (2007), aff’d, 558 F.3d 1326 (Fed. Cir. 2009) (holding that Millenium’s merchandise is
properly classified under HTSUS heading 4407). Thus, there is no longer any dispute that
Millenium’s merchandise is properly classified under heading 4407, and, as such, is subject to the
Softwood Lumber Agreement.
II. Standard of Review
In reviewing a motion to dismiss for failure to state a claim, “any factual allegations in the
complaint are assumed to be true and all inferences are drawn in favor of the plaintiff.” Amoco Oil
Co. v. United States, 234 F.3d 1374, 1376 (Fed. Cir. 2000); see generally USCIT Rule 12(b)(5).
“Dismissal for failure to state a claim is proper only when it is beyond doubt that the plaintiff can
prove no set of facts that would entitle it to relief.” Amoco Oil, 234 F.3d at 1376. Dismissal under
Rule 12(b)(5) is thus proper only if the plaintiff’s allegations of fact are not “enough to raise a right
to relief above the speculative level . . . on the assumption that all the allegations in the complaint
are true (even if doubtful in fact).” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007)
(citations omitted). At the same time, a complaint’s “[t]hreadbare recitals of the elements of a cause
of action, supported by mere conclusory statements, do not suffice.” Ashcroft v. Iqbal, 556 U.S.
Court No. 06-00129 Page 8
662, 678 (2009) (citation omitted). “[O]nly a complaint that states a plausible claim for relief
survives a motion to dismiss.” Id., 556 U.S. at 679.
III. Analysis
Distilled to its essence, Millenium’s argument is that the Government failed to exhaust
administrative remedies because the Government filed the instant action to collect liquidated
damages “prior to the completion of” mitigation proceedings that Millenium maintains were
“pending” at the agency level. Def.’s Motion to Dismiss at 2. Millenium contends that this action
is therefore “premature,” and must be dismissed. Id.
However, the exact same argument has been previously considered – and rejected – by this
court in Canex, a case strikingly similar to the case at bar. See United States v. Canex Int’l Lumber
Sales Ltd., 32 CIT 407 (2008). Millenium’s argument also cannot be reconciled with other relevant
decisions of this court and the Court of Appeals, which highlight the permissive, voluntary, and
discretionary nature of the administrative mitigation proceedings in question. See United States v.
Cocoa Berkau, 990 F.2d 610, 614-16 (Fed. Cir. 1993); United States v. Ataka America, Inc., 17 CIT
598, 605, 826 F. Supp. 495, 501-03 (1993). Moreover, the two cases on which Millenium
principally relies are simply inapposite. See Warner-Lambert Co. v. United States, 24 CIT 205(2000); United States v. Bavarian Motors, Inc., 4 CIT 83, 85-86 (1982). Millenium’s motion to
dismiss thus has no sound basis in the law. See section III.A, infra.
Millenium’s case is just as weak on the facts. As summarized below, contrary to
Millenium’s repeated assertions, no mitigation proceedings were ever commenced at the agency
level. Simply stated, Millenium never availed itself of the “remedy” that it now claims should have
Court No. 06-00129 Page 9
been exhausted. See section III.B, infra.
Finally, as explained below, the scheme that Millenium advocates is entirely unworkable,
and would have the potential to produce dire results in cases such as this. The practical realities of
administrative process and litigation thus bear out the correctness of the Government’s legal position
here. See section III.C, infra.
A. The Legal Merits of Millenium’s Argument
The gravamen of Millenium’s motion to dismiss is that the Government’s commencement
of this action “is in violation of the doctrine of exhaustion of administrative remedies.” Def.’s Supp.
Brief at 1; see also Def.’s Motion to Dismiss at 2. Emphasizing that the Court of International Trade
is directed, “where appropriate,” to “require the exhaustion of administrative remedies,” Millenium
argues that the Government’s attempt to collect liquidated damages is “premature and untimely,”
because – Millenium maintains – the company should have been allowed to engage in mitigation
proceedings at the agency level. See Def.’s Motion to Dismiss at 2, 7, 13; 28 U.S.C. § 2637(d)
(providing for application of doctrine of exhaustion of administrative remedies in “appropriate”
cases); 19 U.S.C. § 1623(c); 19 C.F.R. § 172.1(b).7 According to Millenium, the Government’s
7
The regulations provide that a principal or its surety may file an application (a petition) for
mitigation seeking relief from the assessment of liquidated damages pursuant to 19 U.S.C. § 1623(c).
See 19 C.F.R. § 172.1(b).
Under 19 U.S.C. § 1623(c):
The Secretary of the Treasury may authorize the cancellation of any bond provided
for in this section, or of any charge that may have been made against such bond, in
the event of a breach of any condition of the bond, upon the payment of such lesser
amount or penalty or upon such other terms and conditions as he may deem
sufficient.
Court No. 06-00129 Page 10
asserted failure to exhaust administrative remedies warrants dismissing this action for failure to state
a claim upon which relief can be granted. See Def.’s Motion to Dismiss at 1-2; Def.’s Supp. Brief
at 1.
As the Government notes, however, this precise argument was squarely rejected in Canex
(a case with facts virtually identical to those here), which, in turn, relied heavily on Cocoa Berkau
and Ataka. See Pl.’s Supp. Brief at 3-6, 8-9, 13; Canex, 32 CIT at 408-09 (discussing, inter alia,
Cocoa Berkau, 990 F.2d at 614-16; Ataka, 17 CIT at 605, 826 F. Supp. at 501-03); see also Pl.’s
Response Brief at 6-11, 13-14 (discussing Cocoa Berkau and Ataka); Pl.’s Supp. Brief at 5, 8-16
(same).
Like Cocoa Berkau and Ataka before it, Canex underscored that administrative proceedings
on a petition for mitigation are not only informal, but also permissive and voluntary, and that relief
is granted at the discretion of Customs. See Cocoa Berkau, 990 F.2d at 615-16 (emphasizing that
mitigation proceedings before Customs are “completely voluntary” and that agency’s decision
whether to grant relief is “discretionary”; characterizing mitigation proceedings as “discretionary
and summary [in] nature,” and highlighting “marked contrast” with other “formal and time-
consuming administrative proceedings”); Ataka, 17 CIT at 605-06, 826 F. Supp. at 502-03 (noting
that mitigation proceedings are “voluntary,” and that decision whether to grant relief is at agency’s
“discretion”; describing mitigation proceedings as “discretionary and informal” and “not
mandatory”); Canex, 32 CIT at 408-09 (explaining that mitigation proceedings are “voluntary and
19 U.S.C. § 1623(c). See also 19 C.F.R. § 172.11(b) (stating that a petition for relief may be in any
form); 19 C.F.R. § 172.12(b)(1) (stating that petition for relief “shall be filed within 60 days from
the date of mailing of the notice of the liability for liquidated damages”).
Court No. 06-00129 Page 11
informal, and relief is granted at the discretion of Customs”; characterizing such proceedings as
“permissive”).
Emphasizing the “discretionary and summary” nature of mitigation proceedings, the Court
of Appeals held in Cocoa Berkau that the Government is not required to resolve a pending petition
for mitigation before filing an action to recover liquidated damages in this court. See Cocoa Berkau,
990 F.2d at 614-16 (rejecting Government argument that surety’s commencement of voluntary
mitigation proceedings precluded Government from filing civil action to collect liquidated damages,
and thus tolled statute of limitations). To the same effect, the court in Ataka ruled that, because
administrative mitigation proceedings are “discretionary and informal,” they “need not be resolved
in order for the government to recover liquidated damages under a bond through court action.”
Ataka, 17 CIT at 605, 826 F. Supp. at 502 (involving Government action attempting to recover
customs duties from importer’s successor and surety).
Hewing to Cocoa Berkau and Ataka, the Canex court expressly held that “the Government
was not required to postpone its filing of [an action for liquidated damages] until [the importer at
issue] exercised its right to request mitigation proceedings.” Canex, 32 CIT at 409. Millenium has
made no showing that a different outcome should obtain here.8
8
The judges of the Court of International Trade are in no way bound by the decisions that
their colleagues on the court have rendered in prior cases. See generally Algoma Steel Corp., Ltd.
v. United States, 865 F.2d 240, 243 (Fed. Cir. 1989). However, “[w]henever [a judge] considers the
holding and reasoning of a previous opinion rendered by a different Judge of the CIT [in a similar
case], [he or she] regards such opinions as persuasive.” Nucor Corp. v. United States, 32 CIT 1380,
1447 n.47, 594 F. Supp. 2d 1320, 1380 n.47 (2008); see also, e.g., D & L Supply Co. v. United
States, 22 CIT 539, 540 (1998) (same); Buna v. Pacific Far East Line, Inc., 441 F. Supp. 1360, 1365
(N.D. Cal. 1977) (explaining that “[j]udges of the same district court customarily follow a previous
decision of a brother judge upon the same question except in unusual or exceptional
circumstances”).
Court No. 06-00129 Page 12
Millenium seeks to make much of the fact that the issue presented in Cocoa Berkau was
whether the Government’s action to recover liquidated damages was time-barred. Millenium asserts
that this action is thus distinguishable from Cocoa Berkau because the pending motion involves the
applicability of the doctrine of exhaustion, while Cocoa Berkau involved the applicability of a
particular statute of limitations. See Def.’s Reply Brief at 1-5, 7; Def.’s Supp. Brief at 3-6, 8-9. But
Millenium has failed to explain why that distinction should compel a different result. See generally
Pl.’s Supp. Brief at 4-5, 8-14, 17-19. Indeed, the holding in Cocoa Berkau was premised broadly
on the Court of Appeals’ determination that mitigation proceedings are so voluntary and so
discretionary that they play no role in determining when the Government may sue for liquidated
damages. See Cocoa Berkau, 990 F.2d at 615-16 (explaining nature of mitigation proceedings and
why such proceedings do not bar initiation of civil action by Government to collect liquidated
damages). As Canex recognized, the linchpin in Cocoa Berkau (and Ataka) was the permissive,
voluntary, and discretionary nature of the administrative mitigation proceedings at issue in those
cases – the same administrative proceedings at issue in Canex and here. Canex, 32 CIT at 408-09;
see also Cocoa Berkau, 990 F.2d at 614-16; Ataka, 17 CIT at 605-06, 826 F. Supp. at 501-03.
Contrary to Millenium’s assertions, Cocoa Berkau cannot be cabined to its facts.
Millenium stakes its motion to dismiss on two cases that it labels “directly on point.” Def.’s
Reply Brief at 10; see also Def.’s Motion to Dismiss at 7-11 (discussing the two cases); Def.’s Reply
Brief at 10-13 (same); Def.’s Supp. Brief at 5-8 (same). The first is Warner-Lambert, in which the
court dismissed an action for failure to exhaust administrative remedies. See generally Warner-
Lambert, 24 CIT at 208-11. According to Millenium, Warner-Lambert stands for the proposition
Court No. 06-00129 Page 13
that dismissal of an action such as the instant case “is proper where administrative proceedings
involving liquidated damages have not been completed at the time the court action was
commenced.” Pl.’s Motion to Dismiss at 7. As Canex explained, however, Warner-Lambert lent
no support to the plaintiff in that case; and it is equally unavailing for Millenium here. See Canex,
32 CIT at 409.
The plaintiff in Warner-Lambert brought an application for a temporary restraining order and
preliminary injunction premised on an alleged – and, as of that time, not-yet-realized – threat of
possible sanctions, which, it was claimed, would have a “detrimental impact” on the plaintiff’s
operations. Warner-Lambert, 24 CIT at 205-06. The purported threat of sanctions arose out of
various liquidated damages assessments made by Customs. Id., 24 CIT at 205-06. The Government
established that some of the liquidated damages claims at issue were the subject of petitions for
mitigation filed by the plaintiff that were still pending before Customs. Id., 24 CIT at 206-08.
Further, although the administrative process was complete as to some of the liquidated damages
claims, none had been referred to the Department of Justice for initiation of a collection action. Id.,
24 CIT at 207. Moreover, there were no actual sanction proceedings initiated against the plaintiff.
Id.
The Warner-Lambert court granted the Government’s motion to dismiss. In so doing, the
court discussed the constitutional requirement of ripeness. Warner-Lambert, 24 CIT at 209. In that
context, the court noted that, “where appropriate,” the exhaustion of administrative remedies is
required. Id. (discussing 28 U.S.C. § 2637(d)). The Warner-Lambert court concluded that, in the
case before it, the harm that the plaintiff alleged was merely speculative, because, at the time, there
Court No. 06-00129 Page 14
was at most a threat of sanctions, and because the administrative process was not yet complete. Id.,24 CIT at 209. The court explained that, under such circumstances, it could not “discern the kind
of threat of immediate, irreparable injury necessary to grant or sustain the extraordinary equitable
relief” that a temporary restraining order or preliminary injunction represents. Id., 24 CIT at 208.
Dismissing the plaintiff’s action, the Warner-Lambert court found that it would be “appropriate” for
plaintiff to “exhaust fully its administrative remedies” as to those cases that remained pending in the
administrative pipeline. Id., 24 CIT at 209.
Warner-Lambert bears no resemblance to the case at bar. This is an action brought by the
Government to collect unpaid liquidated damages – not an action for a temporary restraining order
and preliminary injunction, brought against the Government. The action here is based on a breach
of a condition of customs bonds (specifically, Millenium’s failure to present proof of the permits
required by the Softwood Lumber Agreement); and there is nothing unripe or speculative as to that
claim. See Canex, 32 CIT at 409 (in case strikingly similar to case at bar, rejecting same argument
raised by Millenium here, and ruling that “the . . . case is ripe for action”). In contrast, the Warner-
Lambert court’s decision requiring the plaintiff in that case to complete pending administrative
proceedings reflected the court’s determination that – unless and until the plaintiff had a better
understanding of the practical effects (if any) of its alleged non-compliance with the terms of the
bond – the plaintiff’s claim was not ripe for judicial review, because there was no way for the court
to determine whether the plaintiff faced the type of immediate, irreparable injury required for
issuance of a preliminary injunction. See generally Pl.’s Response Brief at 11-12; Pl.’s Supp. Brief
Court No. 06-00129 Page 15
at 5, 19-21.9 As ammunition for Millenium’s argument, Warner-Lambert misses the mark.
The second case on which Millenium relies is Bavarian Motors. See generally Def.’s Motion
to Dismiss at 9-11 (discussing Bavarian Motors, 4 CIT at 85-86); Def.’s Reply Brief at 10-13
(same); Def.’s Supp. Brief at 5-8 (same). But, like Warner-Lambert, Bavarian Motors too fails to
advance Millenium’s cause, for reasons that are summarized in Canex. See Canex, 32 CIT at 409.
In Bavarian Motors, the court held that the Government’s action to collect liquidated
damages from a surety was premature in light of the surety’s pending protest of the liquidated
damages claims at the administrative level. See Bavarian Motors, 4 CIT at 85. In the instant case,
however, neither Millenium nor the surety protested the demand for the liquidated damages.10
Further, as Canex observes, Ataka emphasized that Bavarian Motors was decided prior to the 1984
effective date of 19 U.S.C. § 1505(c), which gave the Government an immediate right to sue for
liquidated damages, notwithstanding the pendency of protest proceedings. See Canex, 32 CIT at 409
(citing Ataka, 17 CIT at 607, 826 F. Supp. at 503 (“[S]ince the effective date of 19 U.S.C. § 1505(c)
[now 19 U.S.C. § 1505(b)], completion of protest proceedings has not been a requirement for suit
9
Moreover, in contrast to Warner-Lambert, in this case not only are there no administrative
mitigation proceedings pending, but, in fact, no such proceedings were ever initiated. See section
III.B, infra.
10
The Government states that – to the extent that the court’s holding in Bavarian Motors was
premised on the court’s determination that the defendant surety in that case had a right to file a
protest concerning the Government’s demand for payment against the bond (see Bavarian Motors,
4 CIT at 85) – subsequent decisions from both the Court of Appeals and this court have established
that the assessment of liquidated damages does not constitute a “charge or exaction” and, thus, that
it cannot be the subject of a protest. See Pl.’s Response Brief at 13 n.7 (citing 19 U.S.C. §
1514(a)(3); United States v. Utex Int’l, Inc., 857 F.2d 1408, 1413-14 (Fed. Cir. 1988); United States
v. Toshoku America, Inc., 879 F.2d 815, 818 (Fed. Cir. 1989); Pope Prods. v. United States, 15 CIT
279, 281-83 (1991) (analyzing Utex and Toshoku, and rejecting argument that a “Notice of Demand
for Liquidated Damages is a protestable decision”)).
Court No. 06-00129 Page 16
to collect.”)). Millenium’s reliance on Bavarian Motors is thus misplaced.11
In sum, there is no substance to Millenium’s position that the Government may file a civil
action to collect liquidated damages only after mitigation proceedings at the agency level are
complete. The settled law is to the contrary.
B. The Factual Basis for Millenium’s Argument
As detailed above, there is no legal merit to Millenium’s claim that the pendency of
administrative mitigation proceedings bars the Government from bringing the instant collection
action for liquidated damages. But, in any event, contrary to Millenium’s assertions, there are no
11
As explained above, the doctrine of exhaustion of administrative remedies does not apply
in circumstances such as these; thus, there was no requirement that administrative mitigation
proceedings be complete before the Government could bring this civil action to collect liquidated
damages. However, even if the doctrine of exhaustion did apply, the Government notes that one or
more of the established exceptions might well operate to excuse a failure to exhaust. See generally
Pl.’s Response Brief at 15-16.
For example, it appears that requiring exhaustion (i.e., requiring the Government to now
allow Millenium to file and pursue a petition for mitigation) would have been a “useless formality,”
because any defenses to liability that Millenium may have could be asserted in this proceeding.
Similarly, the potential relief that would have been available to Millenium in a mitigation
proceeding was a reduction in the amount of liquidated damages demanded. See 19 C.F.R. § 172.21.
However, to the extent that Millenium has continued to believe that it has grounds for mitigation and
should not be required to pay the full amount of liquidated damages that was assessed, the company
has been free to make its case to the Government at any point during the pendency of this action and
to make an appropriate offer of settlement, to attempt to resolve the matter amicably. Finally,
Millenium has failed to make clear what – if any – additional facts it claims need to be developed
at the administrative level. R.R. Yardmasters of Am. v. Harris, 721 F.2d 1332, 1338-39 (D.C. Cir.
1983). The fundamental facts of this case – like those in Canex, a nearly identical case – are fully-
developed, and relatively straightforward: Millenium imported goods that were subject to the
Softwood Lumber Agreement, but failed to provide proof of the permits required under that
agreement. Given these circumstances, there would be no apparent point to requiring the
Government to allow Millenium to file a petition and pursue administrative mitigation proceedings
before the agency.
Court No. 06-00129 Page 17
such mitigation proceedings pending here. Compare, e.g., Def.’s Motion to Dismiss at 8 (asserting
that “administrative liquidated damages cases against Millenium remain under active agency
consideration,” and that “[t]he administrative cases had not concluded at the time Plaintiff
commenced this action, and, for that matter, have not yet concluded”) with Pl.’s Response Brief at
2, 4-6, 9-11 (summarizing chronology of events before the agency, and explaining that neither
Millenium nor its surety ever filed application/petition to institute mitigation proceedings at the
administrative level); Pl.’s Supp. Brief at 1-2, 14-15 (same).12
12
In its briefs, Millenium repeatedly waffles back and forth as to whether administrative
mitigation proceedings were initiated.
Generally, Millenium argues that administrative mitigation proceedings were initiated in a
timely fashion and remained pending at least as of the date the Government commenced this action.
In addition to the citations provided above, see, e.g., Def.’s Motion to Dismiss at 8 (asserting that
“administrative proceedings in this case [have] not been completed”); id. (stating that
“administrative proceedings remain ‘under active agency consideration’”); id. at 9 (asserting that
Government here “filed suit prior to the conclusion of administrative liquidated damages
proceedings” and “prior to the conclusion of the administrative proceedings against Millenium”);
id. at 13 (criticizing Government for “[t]he commencement of this case prior to the . . . conclusion
of any substantive proceedings in the underlying administrative liquidated damages cases”); Def.’s
Reply Brief at 1 (asserting that administrative mitigation proceedings “are in a ‘holding status’”);
id. at 11 (referring to “uncompleted administrative proceedings”; id. (asserting that “the pending
liquidated damages administrative proceedings bar [the instant action]”); id. at 13 (contending that
allegedly pending “administrative cases have been placed in a ‘holding status’”); Def.’s Supp. Brief
at 6 (arguing that “there is an administrative proceeding that was commenced and is still pending”).
Elsewhere, however, Millenium candidly concedes that mitigation proceedings were never
commenced, but seems to suggest that it had some right to do so that was abrogated by the
Government’s commencement of this action. See, e.g., Def.’s Motion to Dismiss at 8
(acknowledging that “Millenium has not . . . exercised its express right to file petitions for relief in
the administrative cases”); id. at 10 (alleging that Millenium “has not been afforded the opportunity
to exercise its right to submit a petition to contest the liquidated damages proceeding”); id. at 11
(asserting that “Millenium withheld the filing of a petition for relief from the liquidated damages
cases,” and complaining that Customs “did not afford Millenium opportunity to exercise its right
to file a petition for administrative relief before . . . filing this action to collect liquidated damages”).
Court No. 06-00129 Page 18
Millenium tries to cast the two letters that the company received from Customs in August
and October 2001 as evidence that administrative mitigation proceedings were pending. To the
contrary, the two letters reflected nothing more than Customs’ agreement to defer action on the
agency’s liquidated damages claims against Millenium (i.e., to place them in “a holding status”),
awaiting “resolution of [Millenium’s] filed protest” contesting Customs’ tariff classification of
Millenium’s merchandise. See Def.’s Motion to Dismiss at Exhs. 1, 3. Nothing in either letter even
hints at the existence of any pending mitigation proceedings initiated by Millenium or its surety.
And it is telling that Millenium itself cannot point to any application or petition for mitigation that
it filed with Customs. Nor can Millenium point to any such application or petition filed by its
surety.
In short, contrary to Millenium’s assertions at various points in its briefs, there are no
relevant administrative mitigation proceedings pending at Customs – and there never were. As
detailed above, however, even if Millenium had commenced administrative mitigation proceedings,
the pendency of such proceedings would not have barred the Government from bringing the instant
In any event, it is clear beyond cavil that administrative mitigation proceedings could have
been initiated only by Millenium or its surety (not by Customs), and that mitigation proceedings
could have been instituted only by the filing of an appropriate application or petition. See 19 C.F.R.
§ 172.1(b) (providing that principal or surety may file application/petition for mitigation seeking
relief from assessment of liquidated damages); 19 C.F.R. § 172.11 (stating that application/petition
for mitigation should specify facts relied upon by petitioner as grounds for mitigation). And it is
undisputed that neither Millenium nor its surety ever filed any such request for relief, even though
such an application/petition for mitigation could have been submitted at any time after Millenium’s
receipt of the Liquidated Damages Notices in 2001. See Pl.’s Response Brief at 9; Pl.’s Supp. Brief
at 14 n.8.
Court No. 06-00129 Page 19
action.13
C. The Practical Implications of Millenium’s Argument
As explained above, there is no legal merit to Millenium’s claim that the doctrine of
exhaustion barred the Government from bringing this action to collect liquidated damages. The
soundness of that outcome as a matter of law is further reinforced by very practical considerations.
Even if the two letters that Millenium and its surety received from Customs in 2001 were to
be read to allow Millenium to delay the filing of a petition for mitigation, Customs’ letters of May
23, 2005 made it clear to any reader that Customs could no longer afford to wait. See Complaint,
Exh. 7 (letters to Millenium and surety, dated May 23, 2005). After allowing Millenium’s
classification litigation to progress, but cognizant of the statute of limitations on the Government’s
liquidated damages claims, Customs’ May 23, 2005 letters explained that the agency would be
willing to continue to defer action on the liquidated damages claims and await the outcome of the
classification litigation – provided that Millenium and its surety executed waivers of the statute of
limitations, to preserve the Government’s right to pursue its liquidated damages claims if Millenium
did not prevail in the classification litigation. See id. The May 23, 2005 letters put both Millenium
and its surety on notice that, without executed waivers, the statute of limitations would leave the
Government with little choice but to bring a collection action in this court. See generally Canex,
32 CIT at 409-10 (concluding that letter from Customs comparable to May 23, 2005 letters here put
13
As the Government notes, “[e]ven if Millenium had availed itself of the opportunity to
submit a petition for mitigation . . . , the Government would have had no obligation to actually
resolve that petition prior to filing suit.” Pl.’s Supp. Brief at 16 n.10 (citing Cocoa Berkau, 990 F.2d
at 615-16; Ataka, 17 CIT at 605, 826 F. Supp. at 501-02; Canex, 32 CIT at 409).
Court No. 06-00129 Page 20
the plaintiff company in that case on notice of potential legal action by agency, and afforded the
company “ample opportunity to execute the statute of limitations waiver or petition for mitigation
proceedings as necessary”; ruling that “[the plaintiff company’s] argument that it was deprived of
the opportunity [to pursue mitigation] . . . is therefore without merit”).14
Notwithstanding the May 23, 2005 letters, both Millenium and its surety refused to execute
waivers. Without such waivers, the Government effectively had no option but to file this action.
Millenium does not dispute that the Government’s liquidated damages claims were subject
to a six-year statute of limitations. See 28 U.S.C. § 2415. Nor does Millenium seriously dispute that
Millenium was in control of whether – and, if so, when – to institute administrative mitigation
proceedings. Yet Millenium here insists that the Government is precluded from filing an action to
collect liquidated damages whenever mitigation proceedings are pending.
As the Government points out, if it had waited to file suit – as Millenium argues it was
required to do – the Government would have faced the very real possibility that, as in Cocoa Berkau,
the statute of limitations would have barred the liquidated damages claims that are the subject of this
action. See Pl.’s Response Brief at 2-3, 11; Pl.’s Supp. Brief at 14-16. The scheme that Millenium
envisions thus would be patently unworkable.
14
As the Government notes, even “after the issuance of the [May 23, 2005] letter[s], neither
Millenium nor its surety took any action to file a petition” seeking mitigation – not even in the
nearly one-year window between the May 2005 letter and the commencement of this civil action in
mid-April 2006. See Pl.’s Response Brief at 10. The Government emphasizes that “[i]f Millenium
desired to avail itself of the voluntary, administrative mitigation proceeding, it had the opportunity
to do so. It did not.” Id. Millenium never explains why it did not file a petition seeking mitigation
after receiving the May 23, 2005 letter. In fact, Millenium conspicuously avoids addressing the
significance of the May 23, 2005 letter in any meaningful sense.
Court No. 06-00129 Page 21
IV. Conclusion
For the reasons set forth above, Millenium’s Motion for Judgment on the Pleadings must be
denied. A separate order will enter accordingly.
/s/Delissa A. Ridgway
Delissa A. Ridgway
Judge
Dated: December 18, 2012
New York, New York
ERRATA
United States of America v. Millenium Lumber Distribution Co. Ltd. and XL Specialty Insurance
Company, Court No. 06-00129, Slip Op. 12-153, dated December 18, 2012.
Page 4: In line two of the second full paragraph, replace “See” with “See”.
Page 13: In line three, replace “Pl.’s Motion to Dismiss” with “Def.’s Motion to Dismiss”.
Page 15: In line three of the second full paragraph, replace “4 CIT at 85.” with “4 CIT at 85-
86.”.
Page 17: In line 11 of the second paragraph of footnote 12, replace “(referring to
“uncompleted administrative proceedings”; id.” with “(referring to “uncompleted
administrative proceedings”); id.”. (In other words, insert a closing parenthesis
immediately before the semicolon.)
January 9, 2013