International Custom Products, Inc. v. United States

United States Court of Appeals
for the Federal Circuit
______________________
INTERNATIONAL CUSTOM PRODUCTS, INC.,
Plaintiff-Appellee
v.
UNITED STATES,
Defendant-Appellant
______________________
2016-1024
______________________
Appeal from the United States Court of International
Trade in No. 1:07-cv-00318-GWC, Judge Gregory W.
Carman.
______________________
Decided: December 15, 2016
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GREGORY HUGH TEUFEL, OGC Law, LLC, Pittsburgh,
PA, argued for plaintiff-appellee.
CLAUDIA BURKE, Commercial Litigation Branch, Civil
Division, United States Department of Justice, Washing-
ton, DC, argued for defendant-appellant. Also represent-
ed by BENJAMIN C. MIZER, JEANNE E. DAVIDSON; AMY
RUBIN, EDWARD FRANCIS KENNY, New York, NY; YELENA
SLEPAK, Office of Assistant Chief Counsel, International
Trade Litigation, United States Bureau of Customs and
Border Protection, New York, NY.
______________________
2 INT’L CUSTOM PRODS., INC. v. UNITED STATES
Before REYNA, LINN, and WALLACH, Circuit Judges.
WALLACH, Circuit Judge.
Appellant United States (“the Government”) appeals
the decision of the U.S. Court of International Trade
(“CIT”) awarding attorney fees to Appellee International
Custom Products, Inc. (“ICP”) pursuant to the Equal
Access to Justice Act (“EAJA”), 28 U.S.C. § 2412(d)(1)(A)
(2012). See Int’l Customs Prods., Inc. v. United States
(ICP VII), 77 F. Supp. 3d 1319, 1335 (Ct. Int’l Trade
2015). We have jurisdiction over the appeal pursuant to
28 U.S.C. § 1295(a)(5). We affirm.
BACKGROUND
The facts and procedural history of this appeal are ex-
tensive, and a brief explanation of the nature of the action
is warranted. ICP’s request for attorney fees stems from
litigation
regarding the classification of certain white sauce
imports under the Harmonized Tariff Schedule of
the United States (“HTSUS”). Following a re-
quest from [ICP], the United States Customs and
Border Protection (“Customs”) issued New York
Ruling Letter D86228 (“the Ruling Letter”) classi-
fying ICP’s white sauce as “sauces and prepara-
tions therefor” under HTSUS 2103.90.9060 (1999).
Years later, Customs issued a notice of action re-
classifying all pending and future entries of white
sauce as “[b]utter and . . . dairy spreads” under
HTSUS 0405.20.3000 (2005) (“the Notice of Ac-
tion”), which increased the tariff by approximately
2400%.
After protesting and paying duties on a single en-
try, ICP filed a claim in the CIT, alleging the No-
tice of Action improperly revoked the Ruling
INT’L CUSTOM PRODS., INC. v. UNITED STATES 3
Letter without following the procedures required
by 19 U.S.C. § 1625(c) (2006).
Int’l Custom Prods., Inc. v. United States (ICP VI), 748
F.3d 1182, 1182–83 (Fed. Cir. 2014). Since ICP filed its
first action in 2005, the CIT has issued five separate
opinions on the matter, two of which were appealed to us.
See generally Int’l Custom Prods., Inc. v. United States
(ICP I), 29 Ct. Int’l Trade 617 (2005) (exercising jurisdic-
tion pursuant to 28 U.S.C. § 1581(i)(4) (2000) and finding
the Notice of Action null and void); Int’l Custom Prods.,
Inc. v. United States (ICP II), 467 F.3d 1324 (Fed. Cir.
2006) (reversing the CIT’s exercise of jurisdiction in ICP I,
vacating on the merits, and remanding with instructions
to dismiss); Int’l Custom Prods., Inc. v. United States (ICP
III), 32 Ct. Int’l Trade 302 (2008) (granting-in-part and
denying-in-part the Government’s motion to dismiss ICP’s
Complaint in a new action); Int’l Custom Prods., Inc. v.
United States (ICP IV), 33 Ct. Int’l Trade 79 (2009) (deny-
ing the parties’ cross-motions for summary judgment);
Int’l Custom Prods., Inc. v. United States (ICP V), 878 F.
Supp. 2d 1329 (Ct. Int’l Trade 2012) (finding the Notice of
Action null and void pursuant to § 1625(c)(1) and ordering
Customs to reliquidate pursuant to the Ruling Letter);
ICP VI, 748 F.3d 1182 (affirming ICP V); ICP VII, 77 F.
Supp. 3d 1319 (awarding attorney fees to ICP pursuant to
the EAJA). The case now returns to us for the third time.
DISCUSSION
I. Legal Standard and Standard of Review
The EAJA provides that “a court shall award to a pre-
vailing party other than the United States fees and other
expenses . . . unless the court finds that the position of the
United States was substantially justified or that special
circumstances make an award unjust.” 28 U.S.C.
§ 2412(d)(1)(A). The Government’s position is substan-
tially justified if it is “justified to a degree that could
satisfy a reasonable person” and has a “reasonable basis
4 INT’L CUSTOM PRODS., INC. v. UNITED STATES
both in law and fact.” Pierce v. Underwood, 487 U.S. 552,
565–66 (1988) (internal quotation marks and citations
omitted). The Government’s position includes the preliti-
gation actions of the relevant administrative agency, as
well as the U.S. Department of Justice’s litigation argu-
ments. See Smith v. Principi, 343 F.3d 1358, 1361–62
(Fed. Cir. 2003). Although the Government’s position
involves both prelitigation and litigation conduct, “only
one threshold determination for the entire civil action is
to be made.” INS v. Jean, 496 U.S. 154, 159 (1990) (foot-
note omitted).
We review the CIT’s determination to award attorney
fees under the EAJA for abuse of discretion. See Chiu v.
United States, 948 F.2d 711, 713 (Fed. Cir. 1991). “[O]nly
if the [CIT] erred in interpreting the law or exercised its
judgment on clearly erroneous findings of material fact, or
its decision represents an irrational judgment in weighing
the relevant factors can its decision be overturned.” Id.(citations omitted).
II. The CIT Did Not Abuse Its Discretion by Awarding
Attorney Fees to ICP
The CIT found that the Government’s position was
not substantially justified and, consequently, awarded
attorney fees to ICP. ICP VII, 77 F. Supp. 3d at 1329–31,
1335. The CIT determined that “[t]he record, considered
as a whole, establishe[d] that the [G]overment position
was rooted in a desire to avoid the timely revocation
process” by using the Notice of Action, rather than follow-
ing the procedures of § 1625(c)(1), to improperly revoke
the Ruling Letter. Id. at 1331. Thus, the CIT held that
“the [G]overnment’s position was not founded on ‘a rea-
sonable basis both in law and fact,’ ‘justified to a degree
that could satisfy a reasonable person.’” Id. (quoting
Pierce, 487 U.S. at 565).
The Government argues that the CIT abused its dis-
cretion by committing five legal errors: (1) “using an
INT’L CUSTOM PRODS., INC. v. UNITED STATES 5
improperly heightened legal standard,” Appellant’s Br. 9;
(2) “reject[ing] the notion that surviving a motion to
dismiss or a motion for summary judgment indicates that
the surviving party has presented significant evidence
that its position is substantially justified,” id. at 11–12;
(3) “improperly minimiz[ing] the significance of [the
Government’s] trial evidence because of [the Govern-
ment’s] post-trial decision not to appeal adverse factual
findings,” id. at 16; (4) “rejecting the Government’s posi-
tion that an EAJA award was not warranted in light of
the novel or unsettled area of law upon which one of the
Government’s defenses was based,” id. at 18; and
(5) “find[ing] that [Customs] was not substantially justi-
fied in its actions during the administrative phase of the
matter,” id. at 21. We address these arguments in turn.
A. The CIT Did Not Apply a Heightened Legal Standard
The Government first argues that the CIT misapplied
the “substantially justified” standard when it stated that
“the substantial justification standard is ‘slightly more
stringent than a simple reasonableness standard,’ and
requires that the Government show that its position ‘was
clearly reasonable,’” because the Supreme Court rejected
the “slightly more” and “clearly” standards in Pierce. Id.
at 10–11 (quoting ICP VII, 77 F. Supp. 3d at 1324–25).
According to the Government, the recitation of the “slight-
ly more” and “clearly” standards “undermines the [CIT]’s
entire substantial justification review” and, thus, “the fee
award should be vacated and the matter remand-
ed . . . with instructions to apply the proper legal stand-
ard.” Id. at 11. We disagree.
The Government is correct that the CIT erred by recit-
ing in the standard of review section of its opinion the
“slightly more” and “clearly” standards, which the Su-
preme Court rejected in Pierce. See 487 U.S. at 567–68
(rejecting the “slightly more” and “clearly” standards
(internal quotation marks and citation omitted)). Howev-
6 INT’L CUSTOM PRODS., INC. v. UNITED STATES
er, a single reference to an incorrect legal standard does
not undermine a final decision, only its application does.
Although the CIT referenced the “slightly more” and
“clearly” standards once, ICP VII, 77 F. Supp. 3d at 1324–
25 (internal quotation marks and citation omitted), it
repeatedly applied the correct “substantially justified”
standard, evaluating whether the Government’s position
was “justified to a degree that could satisfy a reasonable
person” and had a “reasonable basis both in law and fact,”
Pierce, 487 U.S. at 565–66 (internal quotation marks and
citations omitted). Indeed, the CIT repeated the word
“reasonable” or its variants no less than nine times when
evaluating the Government’s position. See ICP VII, 77 F.
Supp. 3d at 1324 n.1, 1329 n.3, 1330–31.
In contrast, there are no instances where the CIT ac-
tually applied the “slightly more” and “clearly” standards,
as the Government acknowledged during oral argument.
See Oral Argument at 1:33–2:11, http://oralarguments.
cafc.uscourts.gov/default.aspx?fl=2016-1024.mp3 (stating
that “it’s true that when the [CIT] made its actual find-
ings, it used the word ‘reasonableness’ and didn’t restate
the ‘clearly reasonable[]’ standard or restate the ‘slightly
more stringent’ standard”). The Government nevertheless
argues that the CIT’s recitation of the heightened stand-
ards “infected” the CIT’s entire analysis. Id. at 2:38.
However, the Government cites no affirmative evidence in
support of its argument, and speculation does not demon-
strate reversible error. See Rogers v. United States, 877
F.2d 1550, 1557 (Fed. Cir. 1989) (holding that speculation
cannot demonstrate an abuse of discretion). As a result,
the CIT’s lone recitation of the “slightly more” and “clear-
ly” standards, when viewed against the remainder of the
CIT’s analysis, did not constitute an abuse of its discre-
tion.
INT’L CUSTOM PRODS., INC. v. UNITED STATES 7
B. Surviving Summary Judgment Alone Does Not Prove
that the Government’s Position Was Substantially
Justified
The Government next contends that “surviving a mo-
tion for summary judgment strongly suggests that the
Government’s position [was] substantially justified for
EAJA purposes” and that, consequently, the CIT erred by
holding otherwise. Appellant’s Br. 12. In particular, the
Government alleges that the CIT “committed legal error”
because it presented sufficient evidence to survive sum-
mary judgment, which it alleges demonstrates that the
Government’s position during trial was substantially
justified. Id. at 16. In support, the Government cites to
the summary judgment standards of proof articulated by
the Supreme Court in Anderson v. Liberty Lobby, Inc., id.
at 12 (citing 477 U.S. 242, 249–50 (1986)), and to prece-
dent from the Seventh Circuit indicating that surviving a
motion to dismiss or motion for summary judgment may
indicate that a position was substantially justified, id. at
13–14 (citing United States v. Pecore, 664 F.3d 1125, 1135
(7th Cir. 2011); United States v. Thouvenot, Wade &
Moerschen, Inc., 596 F.3d 378, 382 (7th Cir. 2010)).
As an initial matter, the Government “bears the bur-
den of proving its position was substantially justified” to
avoid the award of attorney fees under the EAJA, Libas,
Ltd. v. United States, 314 F.3d 1362, 1365 (Fed. Cir.
2003), and Anderson does not hold or otherwise suggest
that this burden shifts if the Government survives sum-
mary judgment. Rather, Anderson concerns standards of
proof at the summary judgment stage, not the award of
attorney fees under the EAJA. See 477 U.S. at 247–57.
As the Government acknowledges, we have not yet di-
rectly considered whether surviving summary judgment
ipso facto demonstrates that the Government’s position
was substantially justified. When our precedent is silent
on a particular question, “we may look to another circuit
8 INT’L CUSTOM PRODS., INC. v. UNITED STATES
for guidance and may be persuaded by its analysis,”
though “decisions from other circuits are not binding on
this court.” Amerikohl Mining, Inc. v. United States, 899
F.2d 1210, 1214 (Fed. Cir. 1990).
We first turn to the approach taken by the Seventh
Circuit, which the Government cites. Under the Seventh
Circuit’s approach, surviving summary judgment may
weigh in favor of finding that the Government’s position
was “substantially justified,” but it is not dispositive. See
Pecore, 664 F.3d at 1135 (stating that surviving summary
judgment is “objective, although not necessarily conclu-
sive, evidence” of a substantially justified position (em-
phasis added) (citation and footnote omitted)). 1 Indeed,
the Seventh Circuit has recognized that, while surviving
summary judgment creates a “presumption” of a substan-
tially justified position under the EAJA, 2 “something
might emerge at trial that showed that the [G]overment
really had no case at all[,] [o]r the [trial] judge might on
reflection decide that he had erred grievously in refusing
to grant the . . . motion to dismiss or motion for summary
judgment.” Thouvenot, 596 F.3d at 382. Thus, even if the
CIT were bound by the Seventh Circuit’s standard, the
1 The Seventh Circuit’s statement in Pecore about
surviving motions to dismiss and for summary judgment
was dicta. See 664 F.3d at 1135 (stating that the com-
ment was a “final point[] . . . [that] bear[s] mentioning”
after having determined that “the intense nature of th[e]
debate suggests . . . that either party’s position could be
accepted as true by a reasonable person”).
2 The Seventh Circuit cited the Eighth Circuit’s de-
cision in EEOC v. Liberal R–II School District to support
the application of a presumption. Thouvenot, 596 F.3d at382 (citing 314 F.3d 920, 926 (8th Cir. 2002)). We are not
aware of any other circuits having applied a presumption
similar to the Seventh and Eighth Circuits.
INT’L CUSTOM PRODS., INC. v. UNITED STATES 9
CIT did not abuse its discretion by determining that the
Government’s position was not substantially justified.
Instead, the CIT properly considered “the entirety of the
record . . . and the positions taken by the [G]overment as
a whole,” including evidence and arguments presented
after the CIT denied ICP’s motion to dismiss and motion
for summary judgment, and determined that “the
[G]overnment’s position was not substantially justified.”
ICP VII, 77 F. Supp. 3d at 1329.
Our discussion of Seventh Circuit case law does not
mean that we have adopted the “presumption” articulated
in those decisions. Indeed, avoiding summary judgment
does not necessarily mean that the position taken at that
stage has a reasonable basis in law and fact. For exam-
ple, pursuant to Federal Rule of Civil Procedure 56(d),
“the court may . . . defer consider[ation of] the motion or
deny it” when “a nonmovant shows by affidavit or decla-
ration that, for specified reasons, it cannot present facts
essential to justify its opposition.” Such circumstances
may arise because, inter alia, the party asserting Rule
56(d) did not possess all of the requisite information,
necessitating discovery, or the party moving for summary
judgment presented temporarily unverifiable or otherwise
unusable evidence. The circumstances also may arise
simply because final resolution may require the trier of
fact to observe witnesses and determine their credibility.
Thus, rather than attach a presumption to the Govern-
ment’s conduct based on a single action taken, we find it
more appropriate to assess the Government’s conduct in
light of the entire record, as the Supreme Court has
instructed. See Jean, 496 U.S. at 159 (explaining that 28
U.S.C. § 2412(d)(1)(A) does not refer “to separate parts of
the litigation” and that courts should consider all stages
of the dispute before making a single determination about
the Government’s conduct).
10 INT’L CUSTOM PRODS., INC. v. UNITED STATES
C. The Government’s Remaining Arguments Are Unper-
suasive
The Government’s remaining arguments similarly do
not demonstrate an abuse of discretion. The Government
argues that the CIT incorrectly determined that the
Government conceded a factual issue (i.e., that white
sauce conformed to the Ruling Letter) by deciding not to
appeal this adverse factual finding. Appellant’s Br. 16–
18. And the Government correctly asserts that courts
should not consider the Government’s decision not to
appeal an issue as a concession on the issue’s merits. See
Oral Argument at 3:52–5:26, http://oralarguments.
cafc.uscourts.gov/default.aspx?fl=2016-1024.mp3; see also
United States v. Mendoza, 464 U.S. 154, 161 (1984) (“Un-
like a private litigant . . . , the Solicitor General considers
a variety of factors, such as the limited resources of the
[G]overnment and the crowded dockets of the courts,
before authorizing an appeal.”). However, the issue was
one of many reasons the CIT determined that the Gov-
ernment’s position was not “substantially justified” for
purposes of the EAJA, and the CIT provided numerous
other reasons why Customs “not only knew that it was
effectively revoking the Ruling Letter, but it unreasonably
ignored the requirement that a ruling letter governs
liquidations until revoked.” ICP VII, 77 F. Supp. 3d at
1330; see id. at 1329 (noting that “[m]ultiple officials at
[Customs] saw an obvious nexus between a rate advance
of the white sauce entries in a Notice of Action and revo-
cation of the Ruling Letter and raised warnings about
doing that” and that the decision “was based not on
complying with the legal restraints identified by others,
but on expedience” (footnote omitted)).
The Government next contends that the CIT improper-
ly found the Government’s position unjustified because “it
was unsettled whether a Customs Form 29, Notice of
Action, could be characterized as an ‘interpretive ruling or
decision’ under . . . § 1625(c) such that its issuance could
INT’L CUSTOM PRODS., INC. v. UNITED STATES 11
trigger notice and comment procedures required for the
revocation of a ruling letter.” Appellant’s Br. 19. Accord-
ing to the Government, the CIT also improperly relied on
the vacated decision in ICP I in finding the Government’s
position unjustified. Id. at 19–20. However, the CIT’s
decision primarily relied on Customs officials’ state-
ments—made before the Notice of Action issued—that
notice and comment was required. See ICP VII, 77 F.
Supp. 3d at 1332 (“But more importantly for the question
of special circumstances, the purely legal arguments
about the nature of a Notice of Action, pursued to final
decision by the [G]overnment’s attorneys, do not appear to
have been a basis for the [G]overnment’s position at the
time [Customs] issued the Notice of Action. The Court
thus finds that the [G]overnment’s position here was a
post-hoc attempt to justify a rate advance [Customs] knew
to be contrary to the governing legal framework . . . .”
(emphases added)).
Finally, the Government contends that the CIT abused
its discretion by finding that Customs’s decision to issue
the Notice of Action was not “substantially justified.”
Appellant’s Br. 21–23. This argument is meritless.
Customs was aware that notice and comment was re-
quired but, despite the legal ramifications, deliberately
decided to forego it. See, e.g., ICP VI, 748 F.3d at 1188–89
(discussing Customs’s deliberations and affirming the
CIT’s finding that Customs was required to comply with
§ 1625(c)(1)); ICP III, 32 Ct. Int’l Trade at 309 (explaining
the “months-long deliberative process” during which
many Customs officials stated that the Notice of Action
must comply with § 1625(c)(1)). Therefore, the CIT was
well within its discretion to make this finding.
12 INT’L CUSTOM PRODS., INC. v. UNITED STATES
CONCLUSION
We review the CIT’s determinations on whether the
Government’s position was “substantially justified” for
abuse of discretion, see Chiu, 948 F.2d at 713, and the CIT
did not abuse its discretion. We have considered the
Government’s remaining arguments and find them un-
persuasive. For these reasons, the final decision of the
U.S. Court of International Trade is
AFFIRMED
COSTS
Costs to ICP.