Hanover Insurance v. United States

Slip Op. 02 - 71
UNITED STATES COURT OF INTERNATIONAL TRADE
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THE HANOVER INSURANCE COMPANY, :
Plaintiff, :
v. : Court No. 94-07-00438
:
THE UNITED STATES,
:
Defendant.
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Memorandum
[Upon trial of Customs Service notice
to surety of suspension of liquidation,
judgment for the plaintiff.]
Decided: July 19, 2002
Sandler, Travis & Rosenberg, P.A. (Arthur K. Purcell); Nev-
ille Peterson LLP (John M. Peterson) for the plaintiff.
Robert D. McCallum, Jr., Assistant Attorney General; John J.
Mahon, Acting Attorney in Charge, International Trade Field Office,
Commercial Litigation Branch, Civil Division, U.S. Department of
Justice (Bruce N. Stratvert); and Office of the Assistant Chief
Counsel, International Trade Litigation, U.S. Customs Service (Beth
C. Brotman), of counsel, for the defendant.
AQUILINO, Judge: As discussed in the slip opinion 01-57,
25 CIT (2001), filed herein, familiarity with which is
presumed, this court was unable to resolve all of the issues raised
by the parties' pleadings and subsequent cross-motions for summary
judgment. That opinion did hold that, as a matter of law, the
plaintiff surety for the importer of Entry No. 81-534208-9 was
entitled to formal notification by the U.S. Customs Service of the
Court No. 94-07-00438 Page 2
suspension of the liquidation of that entry. Customs claims to
have provided such notice, which the plaintiff denies, both sides'
having submitted affidavits or declarations in support of their
respective cross-motions on this issue. The court determined to
require the individuals who subscribed to those submissions to
appear at a trial and undergo cross-examination upon the long-held
belief that that kind of interrogation is the surest test of truth
and a better security than the oath. See, e.g., John Henry
Wigmore, Treatise on the System of Evidence in Trials at Common
Law, vol. 3 (1904); Francis L. Wellman, The Art of Cross-Examina-
tion (1903); Sir Matthew Hale, History of the Common Law, ch. 12
(1680).
I
With one exception, excusable de bene esse, the original
affiants and declarants in this case appeared in open court, where
they and other witnesses were subjected to some fine cross-
examination by opposing counsel. Their questioning, however, did
not transform the sum and substance of the record now more-fully
established, and upon which the court makes the following findings
of fact1:
1. In T.D. 72-161, the U.S. Secretary of the Treasury
reported his "finding of dumping" with respect to Large Power
Transformers From Italy, 37 Fed.Reg. 11,772 (June 14, 1972).
1
To the extent the court's findings in slip opinion 01-57 are
germaine to that which has now been tried, they are hereby
incorporated herein by reference.
Court No. 94-07-00438 Page 3
2. That finding of dumping remained in full force and
effect during the administrative dispute underlying this case.
3. In fulfillment of its contract per U.S. Department of
the Interior, Bureau of Reclamation Solicitation No. DS-7371, Power
Transformer, Grand Coulee Left Powerplant, Columbia Basin Project,
Washington2, Industrie Elettriche di Legnano, Italy manufactured
and shipped equipment to that electrical facility.
4. The contract equipment entered the United States at
the port of Seattle, Washington, Entry No. 81-534208-9.
5. The importer of record was The Legnano Electric
Corporation, as consignee for the Bureau of Reclamation.
6. On or about November 25, 1980, Frank P. Dow Co., Inc.,
as attorney-in-fact for The Hanover Insurance Company, executed an
Immediate Delivery and Consumption Entry Bond (Single Entry) on
Customs Form 7551 for Entry No. 81-534208-9 in the amount of
$358,000.00. See Defendant's Exhibit A.
7. F.W. Myers & Company succeeded Frank P. Dow Co., Inc.
as the agent for The Hanover Insurance Company, the surety with
regard to the consumption entry bond herein.
8. Liquidation of Entry No. 81-534208-9 was suspended
pursuant to statute.
9. Suspension of liquidation of an entry subject to an
outstanding antidumping-duty order pending administrative review
thereof by the International Trade Administration, U.S. Department
of Commerce ("ITA") is for an indefinite period of time.
2
Plaintiff's Exhibit P-3.
Court No. 94-07-00438 Page 4
10. Generally, notice of suspension of liquidation
pending ITA administrative review was provided only once by the
Customs Service.
11. Such notice of suspension of liquidation was provided
on Customs Form 4333A.
12. The Customs Form 4333A had space delineated for
information encaptioned from left to right "series, type and entry
no., date of entry, liquid[ation] code, initial amount, liquidation
amount" and below right "importer number, date of liquidation".
13. The parties could not or did not either discover
before, or produce at, the trial a Customs Form 4333A bearing any
such prescribed information relative to this case.
14. The parties could not or did not either discover
before, or produce at, the trial a Customs Form 4333A, or copy
thereof, either sent to or received by the plaintiff in this case.
15. The Customs Forms 4333A produced at trial were blank
samples, as is the photocopy of one marked and received in evidence
herein as Defendant's Exhibit U2.
16. Defendant's Exhibit B in evidence herein is a photo-
copy of a Customs computer printout extracted on January 27, 1993
from Service data that references six times the entry at issue
herein, three of which include the name and address of the Legnano
Electric Corporation and three of which include the name and
address of the Hanover Insurance Company, and that also references
a mail cycle encoded to reflect particular weeks in 1981, 1982, and
1983.
Court No. 94-07-00438 Page 5
17. In its Final Results of Antidumping Duty Administra-
tive Review; Large Power Transformers From Italy, 52 Fed.Reg. 46,-
806 (Dec. 10, 1987), the ITA set 71.40 percent as the margin of
Industrie Elettriche di Legnano's dumping at the time of the entry
at issue herein.
18. Pursuant to this ITA final determination, antidumping
duties on Entry No. 81-534208-9 were computed to amount to
$292,638.12.
19. The Customs Service liquidated Entry No. 81-534208-9
on June 10, 1988.
20. The Legnano Electric Corporation did not remit the
antidumping duties or any interest accruing thereon, whereupon the
Customs Service made a demand therefor upon the surety.
21. In January 1989, the surety filed a protest with
Customs, No. 3001-9-000059, challenging the Service's demand upon
it. See Defendant's Motion for Summary Judgment, Appendix 6
(Defendant's Exhibit O).
22. In ruling HQ 224397, dated March 1994, the Customs
Service denied the surety's protest with respect to payment of the
antidumping duties demanded but granted it with respect to payment
of interest. See Defendant's Motion for Summary Judgment, Appendix
7 (Defendant's Exhibit P).
23. On or about April 7, 1994, the surety tendered and
the Customs Service received all of the duties demanded.
Court No. 94-07-00438 Page 6
24. In its slip opinion 01-57 filed herein, the court
held that the affidavits submitted in support of plaintiff's motion
for summary judgment, at a minimum, rebutted the presumption that
notice to the surety was in fact given, whereupon at the trial the
defendant was called upon to adduce its evidence first.
25. The papers for Entry No. 81-534208-9, Defendant's
Exhibit A, were timely annotated "S" (for suspension) by the
responsible Customs Service officer.
26. The Trade Agreements Act of 1979 went into effect
during the calendar year of Entry No. 81-543208-9, at which time
the Customs Service was relying on the "old revenue system". Trial
transcript ("Tr."), p. 90.
27. The Customs Service's Automated Commercial System or
"ACS", upon which the defendant relied at trial, first became
operational in 1984. See, e.g., Tr., p. 90.
28. At the time of Entry No. 81-534208-9, Customs Forms
4333A were printed automatically in series and then detached from
each other and sealed individually for mailing.
29. Customs Service records reference some 18,000
notices of extensions or suspensions of liquidation to The Hanover
Insurance Company during 1981, 1982, and 1983.
30. Most Customs Service notices to The Hanover Insurance
Company during 1981, 1982, and 1983 were of extensions, as opposed
to suspensions, of liquidation.
Court No. 94-07-00438 Page 7
31. One employee of The Hanover Insurance Company was
responsible for processing all such Customs Service notices during
1981, 1982, and 1983.
32. That one employee of The Hanover Insurance Company
responsible for processing all such Customs notices during 1981,
1982, and 1983 was familiar with Service notices of suspension of
liquidation on Customs Form 4333A.
33. That one employee of The Hanover Insurance Company
responsible for processing all such Customs notices during 1981,
1982, and 1983 has no recollection of having received or reviewed
a Service notice of the suspension of the liquidation of Entry No.
81-534208-9.
34. All Customs Service notices to The Hanover Insurance
Company of extensions or suspensions of liquidation in 1981, 1982,
and 1983 were subject to review and audit by that surety's national
underwriting manager.
35. The Hanover Insurance Company's national underwriting
manager considered Customs Service notices of suspension of liqui-
dation to be more important than notices of extension of liquida-
tion.
36. The Hanover Insurance Company's national underwriting
manager was familiar with Service notices of suspension of liqui-
dation on Customs Form 4333A.
37. The amount of the single entry bond in this case
would have made it subject to regular audit by The Hanover
Insurance Company.
Court No. 94-07-00438 Page 8
38. The Hanover Insurance Company established files for
bonds and underlying entries subject to its audit.
39. No such audit file was established or later discov-
ered with regard to Entry No. 81-534208-9.
40. F.W. Myers & Company reported monthly to The Hanover
Insurance Company on the status of outstanding Customs bonds.
41. F.W. Myers & Company did not inform The Hanover
Insurance Company of the Customs Service's suspension of the liqui-
dation of Entry No. 81-534208-9.
42. The Hanover Insurance Company's national underwriting
manager was not aware of the outstanding Treasury Department
finding of dumping of large power transformers from Italy at the
time of Entry No. 81-534208-9.
43. Copies of Customs Service notices of suspension of
liquidation involving bonds underwritten by The Hanover Insurance
Company were placed in a master file by that surety.
44. No copy of a Customs Service notice of the suspension
of the liquidation of Entry No. 81-534208-9 was discovered in the
master file for such notices maintained by The Hanover Insurance
Company.
45. Customs Service notices of extensions and of
suspensions of liquidation involving bonds underwritten by The
Hanover Insurance Company were forwarded on a regular basis to F.W.
Myers & Company.
Court No. 94-07-00438 Page 9
46. One employee of F.W. Myers & Company was responsible
for receiving and filing all such Customs Service notices forwarded
by The Hanover Insurance Company during 1981, 1982, and 1983.
47. That one employee of F.W. Myers Company responsible
for receiving and filing all such Customs notices forwarded by The
Hanover Insurance Company during 1981, 1982, and 1983 was familiar
with Service notices of suspension of liquidation on Customs Form
4333A.
48. That one employee of F.W. Myers Company responsible
for receiving and filing all such Customs notices forwarded by The
Hanover Insurance Company during 1981, 1982, and 1983 has no
recollection of having received from The Hanover Insurance Company
a Service notice of the suspension of the liquidation of Entry No.
81-534208-9.
49. That one employee of F.W. Myers Company responsible
for receiving and filing all such Customs notices forwarded by The
Hanover Insurance Company during 1981, 1982, and 1983 set up files
for all Service notices of suspension of liquidation received by
her.
50. That one employee of F.W. Myers Company responsible
for receiving and filing all such Customs Service notices forwarded
by The Hanover Insurance Company during 1981, 1982, and 1983 has no
recollection of having established a file for Entry No. 81-534208-9
in conjunction with the suspension of its liquidation.
Court No. 94-07-00438 Page 10
51. That one employee of F.W. Myers Company responsible
for receiving and filing all such Customs Service notices forwarded
by The Hanover Insurance Company during 1981, 1982, and 1983 was
unable to discover for production in this case any file established
for Entry No. 81-534208-9 in conjunction with the suspension of its
liquidation.
II
Each of the government's witnesses who appeared and test-
ified at the trial herein lent support to the long-standing
judicial presumption that civil servants carry out their official
duties in an orderly and regular manner under the law. Cf. United
States v. Chemical Foundation, Inc., 272 U.S. 1, 14-15 (1926); U.S.
Postal Service v. Gregory, 534 U.S. 1, , 122 S.Ct. 431, 436
(2001).
A
None of them, however, was able to unrebut the corollary
presumption in this case that such expectable regularity resulted
in the requisite notice to the surety. Cf. Int'l Cargo & Surety
Ins. Co. v. United States, 15 CIT 541, 544, 779 F.Supp. 174, 177
(1991). Two of them, namely, Arthur Versich and Roger Odom, also
testified from their acquired perspectives at the Customs Service's
centralized computer data center with regard to the matter of Ford
Motor Co. v. United States, wherein the court found that the
computer systems in place at Customs for the preparation
and mailing of extension notices are sufficient to give
rise to the presumption that Customs properly prepared
and mailed the notices of extension of liquidation.
Court No. 94-07-00438 Page 11
These notices are presumed to have been received by the
plaintiff, who has the burden of proving non-receipt.3
The court held that the plaintiff did not satisfy this burden,
essentially because the court was
not persuaded that Ford's internal record retention and
transmittal system could account adequately for all
incoming mail so as to preclude the misplacement of
extension and suspension notices.
21 CIT at 1001-02, 979 F.Supp. at 889. While that opinion
mentions both kinds of notices, in that action extensions of liqui-
dation remain the issue, which kind the evidence in this case
clearly shows to be much more commonplace and thus numerous and
infinitely more difficult to keep track of. Whatever the problems
of the Ford Motor Company in fielding such notices (and even of The
Hanover Insurance Company), the record now established at bar
reflects a concerted, coordinated effort by the plaintiff to
husband each and every one of the much-less-frequent notices of
suspension of liquidation received by it from Customs. Indeed, an
anomaly in this case is that, while defendant's exhibit B lists
notices of suspension to Hanover in 1981, 1982, and 1983, the
standard Service operating procedure has been to provide but one
such notice, doubtless due to the indefinite duration of most, if
not all, suspensions.
Once, as herein, the government's presumption of notice
has been rebutted, it is incumbent upon Customs to prove mailing.
3
21 CIT 983, 1001, 979 F.Supp. 874, 889 (1997), vacated and
remanded for trial, 157 F.3d 849 (Fed.Cir. 1998), dismissed after
trial, 24 CIT , 116 F.Supp.2d 1214 (2000), rev'd and remanded,
286 F.3d 1335 (Fed.Cir. 2002).
Court No. 94-07-00438 Page 12
See, e.g., F.W. Myers & Co. v. United States, 6 CIT 215, 216-17,
574 F.Supp. 1064, 1065 (1983), citing Orlex Dyes & Chemicals Corp.
v. United States, 41 Cust.Ct. 168, 170, C.D. 2036, 168 F.Supp. 220,
222 (1958). The Service should best do so by producing an
individual involved in delivering its notices to the mail, for
example, or having been somehow or -where within the ambit of
attempted forwarding to an importer and surety. See, e.g., United
States v. Int'l Importers, Inc., 55 CCPA 43, 52-53, C.A.D. 932
(1968), citing Compass Instrument & Optical Co. v. United States,
47 Cust.Ct. 10, C.D. 2271 (1961); Orlex Dyes & Chemical Corp. v.
United States, supra; Clayton Chemical & Packaging Co. v. United
States, 38 Cust.Ct. 617, R.D. 8774, 150 F.Supp. 628 (1957). The
defendant has not done so in this case4, whereupon it became neces-
sary for it to adduce
proof of an invariable custom or usage in an office of
depositing mail in a certain receptacle, that the letter
in question was deposited in such receptacle, and in
addition there must be testimony of the employee, whose
duty it was to deposit the mail in the post office, that
he either actually deposited that mail in the post
office, or that it was his invariable custom to deposit
every letter left in the usual receptacle, and that he
never failed in carrying out that custom.
United States v. Int'l Importers, Inc., 55 CCPA at 53, quoting
4
Apparently, those particular individual(s) were not Customs
officers, rather civilian contractor(s). See Tr., p. 137. The one
government witness at the trial who could have been a direct
participant in the notification process proved not to have been.
See id. at 18, 21, 39, 40. Cf. United States v. Getz Brothers &
Co., 55 CCPA 90, C.A.D. 938 (1968)(Customs Deputy Collector
testified that he personally processed entries and notices with
regard thereto, including stamping, dating, and mailing, always in
the presence of a witness).
Court No. 94-07-00438 Page 13
United States ex rel. Helmecke v. Rice, 281 Fed. 326, 331 (S.D.
Tex. 1922).
Again, the defendant has not done so. Essentially, the
only document of any moment produced by the defendant is its
exhibit B, which is nothing more than a computer abstract derived
more than a decade later via a program not in existence at the time
notice should have been provided to the surety now at bar. While
the faith exhibited by defendant's witnesses in their computerized
system(s) may be well-placed, difficult cases such as this should
not be decided upon after-the-fact, electronically-based faith
alone.
B
To assume, on the other hand, acceptable proof of mailing
would raise a presumption of delivery. See, e.g., Rosenthal v.
Walker, 111 U.S. 185, 193 (1884); Intra-Mar Shipping Corp. v.
United States, 66 Cust.Ct. 3, 5-6, C.A.D. 4160 (1971). Of course,
that presumption is also rebuttable. See, e.g., Francis Wharton,
A Commentary on the Law of Evidence in Civil Cases, vol. 2, §1323
(2d ed. 1879). Indeed,
[p]roof of mailing is not ipso facto proof that the no-
tice was given to the importer, where the unrefuted
testimony is that no notice was received.
Intra-Mar Shipping Corp. v. United States, 66 Cust.Ct. at 6, citing
United States v. Int'l Importers, Inc., supra. To be sure, to
require the government to prove not only mailing, but
actual receipt of Form 4333-A by the importer, would
erect a virtually unassailable hurdle. Rarely, if ever,
would the government possess or elicit proof of receipt
from an importer claiming nonreceipt.
Court No. 94-07-00438 Page 14
A.N. Deringer, Inc. v. United States, 20 CIT 978, 993 (1996). Cf.
Ford Motor Co. v. United States, supra; Prosegur, Inc. v. United
States, 25 CIT , 140 F.Supp.2d 1370 (2001). Hence, that has not
been the approach taken in this case. Rather, the plaintiff has
presented its witnesses in open court for cross-examination by
government counsel, which, however skillful, did not diminish their
original attestations of nonreceipt. Moreover, their testimony
buttressed the appropriateness of accepting, de bene esse, the af-
fidavit of the other Hanover witness with integral knowledge of the
receipt, review, filing, and forwarding of all Customs notices of
suspensions of liquidation by the plaintiff5. Finally, plaintiff's
counsel were able to elicit upon cross-examination of defendant's
witnesses the existence of Service glitches. According to Mr.
Versich, for example, Customs discovered in 1989, notwithstanding
the operation of its more sophisticated "ACS" by then, that several
thousand notices, dating back to 1986, had not been actually
5
See, e.g., Tr., pp. 241-43. Compare A.N. Deringer, Inc. v.
United States, 20 CIT 978, 981 (1996)(the employee in a similar
role at Deringer not called to testify and no explanation for her
absence from trial offered by the plaintiff) and Sanford Steel Pipe
Products Co. v. United States, 68 Cust.Ct. 192, 195, C.D. 4359
(1972):
. . . Neither the mailroom girl nor the export manager,
who sometimes got mail destined for the import manager,
was called as a witness in the case, and their non-
appearance as witnesses in the case remains un-
explained[;]
with Orlex Dyes & Chemicals Corp. v. United States, 41 Cust.Ct.
168, C.D. 2036, 168 F.Supp. 220 (1958)(the necessary witnesses in
the established path of receipt of Customs Service notices each
called to testify, thereby buttressing presumption of nonreceipt).
Court No. 94-07-00438 Page 15
printed and thus delivered. See Tr., p. 105. On his part, Mr.
Odom admitted that the "old"6 computer revenue system in effect at
the time of Entry No. 81-534208-9 was more prone to errors than the
one underlying the problem discovered in 1989. See id. at 136-37.
C
Be those particular imperfections as they were, whichever
side better sustains its burden(s) of proof must be the prevailing
party. And a fair preponderance of the evidence has been held to
be that standard in a civil suit like this. E.g., Addington v.
Texas, 441 U.S. 418, 423 (1979); St. Paul Fire & Marine Ins. Co. v.
United States, 6 F.3d 763, 769 (Fed.Cir. 1993). The court of
appeals in St. Paul defined preponderance of the evidence in civil
actions to mean "the greater weight of evidence, evidence which is
more convincing than the evidence which is offered in opposition to
it." 6 F.3d at 769, quoting Hale v. Dep't of Transp., 772 F.2d
882, 885 (Fed.Cir. 1985).
Here, the evidence now on the record clearly favors the
plaintiff in terms of both weight and content. In fact, there is
little left of defendant's position once the legal presumptions
appropriately favoring its role and circumstance were rebutted by
the plaintiff with regard to notification by the Customs Service of
the suspension of the liquidation of Entry No. 81-534208-9.
6
Tr., p. 90.
Court No. 94-07-00438 Page 16
III
Plaintiff's preponderance on the issue of notice is so
clear-cut that the court hereby concludes that its resolution of
the other issue reserved by slip opinion 01-57 for the trial, to
wit, whether or not the Customs Service failed to follow the ITA's
liquidation instructions7, is not now necessary. Judgment will
enter accordingly.
Decided: New York, New York
July 19, 2002
________________________________
Judge
7
See Slip Op. 01-57, p. 22 and 25 CIT , n. 5.
J U D G M E N T
UNITED STATES COURT OF INTERNATIONAL TRADE
Thomas J. Aquilino, Jr., Judge
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THE HANOVER INSURANCE COMPANY, :
Plaintiff, :
v. : Court No. 94-07-00438
:
THE UNITED STATES,
:
Defendant.
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The parties having interposed cross-motions for summary
judgment; and the court in its slip opinion 01-57, 25 CIT
(2001), having held that, as a matter of law, the plaintiff surety
for the importer of Entry No. 81-534208-9 was entitled to formal
notification by the United States Customs Service of the suspension
of the liquidation of that entry; and the court having held a trial
on the issue of whether or not there had been such notification and
having, after due deliberation, rendered a decision thereon; Now
therefore, in conformity with said decisions, it is hereby
ORDERED, ADJUDGED and DECREED that the plaintiff recover
from the defendant the duties which were paid by it to the United
States Customs Service with regard to Entry No. 81-534208-9 and
which underlie this case, together with interest thereon as
provided by law.
Dated: New York, New York
July 19, 2002
Judge