United States v. World Commodities Equipment Corp.

Slip Op. 08 - 35
UNITED STATES COURT OF INTERNATIONAL TRADE
:
THE UNITED STATES :
:
Plaintiff, :
:
v. : Before: MUSGRAVE, Senior Judge
: Court No. 07-00263
WORLD COMMODITIES EQUIPMENT :
CORP., and HARTFORD FIRE :
INSURANCE COMPANY :
:
Defendants. :
____________________________________ :
:
HARTFORD FIRE INSURANCE :
COMPANY, :
:
Plaintiff, :
:
v. :
:
WORLD COMMODITIES EQUIPMENT :
CORPORATION, :
:
Cross-Defendant. :
____________________________________ :
[Denying Customs’ out-of-time motion for out-of-time service of process upon defendant World
Commodities Equipment Corp. and dismissing action as to that defendant; denying motion to
dismiss as to Hartford Fire Insurance Co.]
Dated: March 21, 2008
Court No. 07-00263 Page 2
OPINION AND ORDER
Jefferey S. Bucholtz, Acting Assistant Attorney General; Jeanne E. Davidson, Director,
Franklin E. White, Assistant Director, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice (Sean M. Dunn) for the plaintiff;
Barnes, Richardson & Colburn (Frederick D. Van Arnam) for defendant Hartford Fire
Insurance Company;
Defendant World Commodities Equipment Corp. did not participate in this action.
On July 16, 2007 the United States Department of Homeland Security, Customs and Border
Protection (“CBP” or “Customs”) filed with the Court a summons and complaint to enforce civil
penalties and recover unpaid duties pursuant to 19 U.S.C. § 1592 (2000) for an entry of fresh garlic
imported into the United States on July 16, 2002.1 Customs alleges that Defendant importer World
Commodities Equipment Co. (“WCE”) attempted to enter the fresh garlic into the commerce of the
United States by means of documents containing “material false statements” showing that the garlic
originated from Mexico, when the actual country of origin was the People’s Republic of China.
Compl. at ¶ ¶ 5, 7. However, Customs has apparently failed to effect service of process on WCE
within the 120-day time period required by CIT Rule 4; currently before the court is Customs’ out-of
-time motion to serve the summons and complaint on WCE approximately one month beyond the
120-day deadline.
Co-defendant surety Hartford Fire Insurance Co., (“Hartford”) asserts that Customs’ failure
to effectuate service of process on WCE within the 120-day deadline requires dismissal as to WCE.
Hartford asserts further that if dismissal is granted as to WCE, the court must grant its motion to
1
Pursuant to the five-year statute of limitations provided in 19 U.S.C. § 1621, July 16,
2007 was the last date in which the action could be filed.
Court No. 07-00263 Page 3
dismiss the action against Hartford as well (pursuant to Rule 12(b)(5)) or, alternatively, “to convert
this matter to summary judgment” or decide the action in Hartford’s favor based on the pleadings.
Hartford’s Mot. In Opp. at 13. For the reasons set forth below, the court will (1) deny plaintiff’s out-
of-time motion and dismiss the matter as to WCE, and (2) deny Hartford’s motion to dismiss.
Background
On July 16, 2007 Customs sent to Hartford and WCE a notice of the commencement of the
current action with a request that each of the defendants waive formal service of a summons. See
CIT Rule 4(d). Defendant Hartford signed and returned the waiver on August 28, 2007; defendant
WCE apparently never acknowledged receipt of those documents. Because WCE did not waive
formal service of process, Customs was required, pursuant to CIT Rule 4(m), to formally serve the
summons and complaint on WCE within 120 days after the July 16, 2007 filing of the complaint.
Day 120 fell on November 13, 2007, but Customs had not served WCE. On November 30, 2007,
Customs filed with the Court a pleading entitled “Plaintiff’s Out of Time Motion for Leave to Serve
Summons and Complaint Out of Time on Defendant [WCE].” In that motion, Customs states that
the summons and complaint had not been served on WCE, but that service was expected to occur
“on or about December 3, 2007.” Pl.’s Out of Time Mot. at 1. Customs eventually served WCE on
December 10, 2007. Pl.’s Resp. to Hartford’s Mot. in Opp. at 8.
Discussion
I. Dismissal as to WCE
Rule 4(m) of the Court’s Rules provides
(m) TIME LIMIT FOR SERVICE.
If a service of the summons and complaint is not made
upon a defendant within 120 days after the filing of the complaint, the
Court No. 07-00263 Page 4
court upon motion or its own initiative after notice to the plaintiff,
shall dismiss the action without prejudice as to that defendant or
direct that service be effected within a specified time; provided that
if the plaintiff shows good cause for the failure, the court shall extend
the time for service for an appropriate period. This subdivision does
not apply to service in a foreign country pursuant to subdivision (f)
or (j)(1).
CIT R. 4(m). Subsequent to the passage of the 1993 Amendments to the Federal Rules of Civil
Procedure, most jurisdictions require that the consideration of whether to extend the time for service
of process under Rule 4(m) requires a district judge to engage in what is essentially a two-part
inquiry.2 First, the court must determine whether “good cause” exists for an extension of time; if the
court finds that good cause exists, it must extend time for service “and the inquiry is ended.”
Petrucelli v. Bohringer and Ratzinger GMBH, 46 F.3d 1298, 1305 (3d Cir. 1995). Second, “even
if there is no good cause shown,” the court must then consider whether the circumstances of the case
warrant the grant of a discretionary extension of time. See Fed. R. Civ. P. 4(m) and Fed. R. Civ. P.
advisory committee notes, 28 U.S.C. App., p. 654 (authorizing courts discretion to grant an extension
of time “even if there is no good cause shown,” noting that “[r]elief may be justified, for example,
if the applicable statute of limitations would bar the refiled action, or if the defendant is evading
service or conceals a defect in attempted service.”); Henderson v. United States, 517 U.S. 654, 662
(1996) (recognizing that the 1993 amendments to the rules accorded courts the discretion to enlarge
the 120-day service period even without a showing of good cause).
Prior to the 1993 Amendments, this Court established a standard for demonstrating “good
2
Prior to December 1, 1993, CIT Rule 4(m) was designated as 4(h) and the comparable
Federal Rule of Civil Procedure was 4(j). After December 1, 1993 (and the 1993 Amendments)
the letter designations were harmonized so that CIT Rule 4(m) and Federal Rule 4(m) are the
same rule.
Court No. 07-00263 Page 5
cause” pursuant to Rule 4 in United States v. Gen. Int’l Mktg. Group, 14 CIT 545, 742 F.Supp. 1173(1990). In that case, Judge Watson concluded that
a fair standard of good cause is one which requires people to show
behavior consistent with the recognition that a 120 day deadline
exists. It is worth noting that the word “deadline” originated in
prisons to describe a line or boundary, the crossing of which
subjected prisoners to the penalty of death. It would seem reasonable
therefore to require plaintiffs to make such efforts at service as are
consistent with a recognition that 120 days may otherwise mark the
death of the action.
14 CIT at 548, 742 F.Supp. at 1176. In Gen. Int’l, the Court found that the plaintiff failed to
demonstrate good cause because the plaintiff’s efforts at service were essentially limited to simply
mailing the summons and complaint to the defendant’s last known address. Although Gen. Int’l
preceded the 1993 amendments to Rule 4, the court sees no reason to deviate from the “good cause”
standard established therein to address the first part of the inquiry.
In the current matter, Customs asserts that “good cause” exists for an extension of time
because the principal attorney on the case suffered “a broken arm, which required surgery upon two
occasions and significant time out of the office for recovery and medical appointments.” Pl.’s Out
of Time Mot. at 2. Customs contends that the court’s standard of “good cause” should include an
attorney’s illness, as noted in LeMaster v. City of Winnemucca, 113 F.R.D. 37 (D. Nev 1986)
(finding “good cause” for 17-day delay in service where plaintiff’s sole attorney was being treated
for terminal cancer). Additionally, Customs notes that “WCE would not have good arguments based
upon the delay,” because “it appears that WCE attempted to evade service.” Customs bases this
allegation on its contention that (1) service of process was delayed by a week because WCE’s
registered agent was not found at the address listed by the Texas Secretary of State; and (2) “it took
Court No. 07-00263 Page 6
the process server numerous attempts” to serve additional documents on WCE. Pl.’s Resp. to
Hartford’s Mot. in Opp. at 8.
Customs argues further that even if no good cause exists, the court should exercise its
discretion to grant an extension of time for service. Customs urges the court to consider (1) the fact
that the running of the statute of limitations would bar refiling of the claim; (2) that WCE was served
“less than one month beyond the statutory deadline” and would suffer no prejudice from the delay;
and (3) that Hartford has suffered “no prejudice whatever” as a result of the delayed service to WCE.
Id. at 10. Finally, Customs asserts that Hartford “lacks standing to assert the legal rights of WCE
as to the delayed service,” because Hartford was timely served with the complaint. Id. at 11.
The court cannot find that good cause exists for the delay in service here. Given that
Customs agreed to accept the waiver of service within 60 days of July 16, 2007, Customs would
have been aware on September 15, 2007 that WCE refused to waive service, yet it took no further
action in the matter until November 30, 2007, almost two weeks after the expiration of the 120-day
service period. Except for the initial request for waiver of service, Customs apparently made no
attempt whatsoever to serve WCE within the 120-day period. Such complete inaction cannot
plausibly be interpreted as “behavior consistent with the recognition that a 120-day deadline exists.”
Further, even if the court were to adopt the “good cause” standard from LeMaster, it is unlikely that
that standard would affect the court’s decision here. In LeMaster, the only attorney serving the
plaintiff underwent weekly treatments of chemotherapy and radiation to treat what eventually
became terminal cancer. LeMaster, 113 F.R.D. at 38. In this case, the plaintiff is represented by the
United States Department of Justice, and the individual attorney assigned to the case broke his arm
Court No. 07-00263 Page 7
on September 22, 2007. Although the court is sympathetic to counsel’s injury, a broken arm cannot
realistically be compared to terminal cancer. More importantly, counsel for the plaintiff is hardly
a solo practitioner with limited resources: counsel is an attorney for the Department of Justice. The
plaintiff has provided no reason why counsel could not have obtained assistance on this matter after
his injury, or why counsel’s supervisor could not have the matter reassigned to another attorney.
Finally, although a defendant’s attempt to evade service of process is generally a compelling
reason to find good cause, Customs’ vague allegations as to a single address change and difficulty
in serving other pleadings (which, pursuant to CIT Rule 5(b), may be served by “[m]ailing a copy
to the last known address of the person served”) cannot reasonably be viewed as evasion of service.
Moreover, because the difficulties resulting from the address change or in serving other pleadings
took place well after the 120-day service period, Customs cannot realistically expect the court to find
that those occurrences were a cause of the belated service.
However – as noted above – even without a showing of good cause, the court must still
consider whether the totality of the circumstances warrant a permissive extension of time. Paneras,
94 F.3d at 341. Unfortunately, other than noting that relief “may be justified” in situations where
the statute of limitations has expired or where the defendant is evading service, neither the caselaw
nor the Advisory Committee notes provide clear guidelines as to what other circumstances may
warrant a discretionary extension of time. Moreover, even the passage of the statute of limitations
is far from a guarantee of discretionary extension, as Courts in most jurisdictions routinely dismiss
actions where other factors are more compelling. See Tuke v. United States, 76 F.3d 155, 156 (7th
Cir. 1996) (upholding dismissal and observing that “an attorney who files suit when the statute of
Court No. 07-00263 Page 8
limitations is about to expire must take special care to achieve timely service of process, because a
slip-up is fatal”)3; Coleman v. Milwaukee Bd. of School Dir., 290 F.3d 932, 934 (7th Cir. 2002)
(upholding dismissal where statute of limitations had run, noting that “the judge understandably was
troubled by the fact that the plaintiff had delayed till almost the last minute in attempting service.”);
Zapata v. City of New York, 502 F.3d 192, 199 (2nd Cir. 2007) (upholding dismissal in spite of
passage of the statute of limitations where plaintiff “made no effort to effect service within the
service period, neglected to ask for an extension within a reasonable period of time, and has
advanced no cognizable excuse for the delay”). With no concrete factors, district judges have
essentially determined each case on an individual basis while taking care not to “overlook any of the
factors urged . . . by the plaintiff for exercising discretion in [its] favor.” Coleman, 290 F.3d at 934.
In this case, the court is unconvinced that a discretionary extension of time is appropriate.
Customs waited until the last day of the five-year statute of limitations to file the action, but instead
of “taking special care to achieve timely service of process” Customs sat on its hands until two
weeks after the passing of the 120-day service period. Even in cases deemed worthy of a
discretionary extension because the plaintiff was pro se or because the method of service was
unusual or complicated, the plaintiffs made some (albeit botched) attempt at service that oftentimes
had the effect of providing actual notice of the claim to the defendant. See Coleman, 290 F.3d at
935-36. However, nothing indicates that such is the case here: the plaintiff is not pro se, the rules
3
The court notes that Zapata v. City of New York, 502 F.3d 192 (2nd Cir. 2007) and
other cases support the notion that the filing of an action actually “tolls” the statute of limitations
until service of process is completed or the 120-day period expires. Hence, a plaintiff who had
60 days left in the statute of limitations when he filed would have that 60 days tacked onto the
end of the 120 day period in order to refile.
Court No. 07-00263 Page 9
of service are no more complex than any other customs case, and there is no clear indication that the
defendant had actual notice of the claim. Accordingly, the court will deny the plaintiff’s out-of-time
motion and dismiss the action as to WCE. Although the court’s dismissal is technically without
prejudice to refiling, the expiration of the statute of limitations essentially ends the action as to WCE
because Customs appears to be time-barred by the statute of limitations from refiling the claim.
II. Dismissal as to Hartford
The court must now determine whether Custom’s action against Hartford must be dismissed
if WCE is no longer a party to the case. Hartford argues that the court must dismiss the case against
it because, without WCE as a party to the case, “the government cannot establish at court the
elements proving that WCE violated 19 U.S.C. § 1592(a).” Def.’s Reply to Pl.’s Resp. to Mot. to
Dismiss at 10. Hartford essentially contends that the government must establish the elements of the
section 1592(a) violation in an action “against the importer as a predicate to prosecuting a claim for
duties against the surety under section 1592(d).” Def.’s Reply to Pl.’s Resp. at 7 (emphasis added).
The court does not agree. Nothing in section 1592(d) indicates that the only manner by
which the government may prove a violation of section 1592(a) is via successful suit against the
importer. 19 U.S.C. § 1592(d) provides:
(d) Deprivation of lawful duties, taxes, or fees
Notwithstanding section 1514 of this title, if the United States
has been deprived of lawful duties, taxes, or fees as a result of a
violation of subsection (a) of this section, the Customs Service shall
require that such lawful duties, taxes, and fees be restored, whether
or not a monetary penalty is assessed.
19 U.S.C. § 1592(d) (2000). Although section 1592(d) requires a “violation of subsection (a)” as
Court No. 07-00263 Page 10
a prerequisite for an award pursuant to section (d), nothing in the plain language of section 1592(d)
indicates that such a violation can only be established in a suit against the importer. This Court has
discussed this concept in a number of cases involving sureties. In United States v. XL Specialty Ins.
Co., the Court addressed this very issue:
Of course, such violation must be established for there to be any such
collection, but it does not necessarily follow that that predicate be
established in an action between the government and the importer.
That is, Blum held there to be a direct cause of action against a surety
for recovery of lost duties due to violation of section 1592(a), which
is this matter at bar. The government is not foreclosed from
commencing this kind of action first. To be sure, when it does so, it
bears the burden of proving such violation of the statute, just as it
does in any action brought by it against an importer pursuant to 19
U.S.C. § 1592.
462 F.Supp.2d 1364, 1366-67 (2006) (emphasis added) (discussing United States v. Blum, 858 F.2d
1566 (Fed. Cir. 1988). See also United States v. Washington Int’l Ins. Co., 28 CIT__ , 374 F.Supp.
2d 1265 (2005) (surety successfully defended against Customs’ suit for duties by showing importer
had committed no violation under section 1592(a), even though the importer was not a party to the
case).
The only difference between XL Specialty and the current matter is that instead of bringing
an action against the surety first, Customs is now maintaining an action only against the surety.
However, the court sees no reason to bar such a lawsuit: pursuant to the concept of joint and several
liability that is the mainstay of the surety-principal relationship, as well as the language of the bond,
Customs has the option to sue either party for duties. See 19 C.F.R. § 113.62 (“Basic importation
and entry bond conditions”); Washington Int’l Ins. Co. v. United States, 25 CIT 207, 225, 138
F.Supp. 2d 1314, 1331 (2001) (holding that the joint and several liability stemming from the
Court No. 07-00263 Page 11
language of the bond “grants the United States the discretionary authority to seek payment from [the
bond surety] independently of any action that may be brought against the principal.”); Blum, 858
F.2d at 1570 (holding that § 1592(d) “provides the United States with a cause of action to recover
duties from those parties traditionally liable for such duties, e.g., the importer of record and its
surety.”); Balboa Ins. Co. v. United States, 775 F.2d 1158, 1160 (Fed. Cir. 1985) (holding that a
surety bond “creates a three-party relationship, in which the surety becomes liable for the principal's
debt or duty to the third party obligee (here, the government).”). As the United States Court of
Appeals for the Federal Circuit observed:
The surety's obligation to pay does not wait for completion of legal
contests between the principal and the creditor. If a surety's
obligation to pay only arose upon conclusion of lawsuits, the creditor
would lose a significant part of the protection it bargained to obtain.
Ins. Co. of North America v. United States, 951 F.2d 1244, 1246 (Fed. Cir. 1991). Hence, the court
finds no support for Hartford’s contention that Customs cannot establish a violation of section
1592(a) without WCE as a party to the suit, and can see no reason why Customs inability to bring
an action under section 1592(a) would otherwise preclude it from suing a surety under section
1592(d), see United States v. Jac Natori Co., Ltd., 108 F.3d 295 (1997) (permitting recovery of
duties under section 1592(d) even where the statute of limitations under former 19 U.S.C. § 1621barred an action for recovery of penalties under section 1592(a)).
The court recognizes that Hartford may have several defenses against the current action
pursuant to its status as a surety and relating to whether its obligations as a surety have been
Court No. 07-00263 Page 12
discharged.4 However, Hartford has asserted no defenses in this regard and it is not within the
purview of the court to do so on its behalf. Accordingly, the court will deny Hartford’s motion to
dismiss and allow the suit against Hartford to proceed. If Hartford wishes to submit a proper motion
for summary judgment to this effect, it must do so in accordance with CIT Rule 56.
Conclusion
Upon consideration of the foregoing, Customs’ out-of-time motion for out-of-time service
of process upon the defendant WCE is denied, and the matter dismissed as to WCE. Hartford’s
motion to dismiss is denied.
SO ORDERED.
/s/ R. Kenton Musgrave
R. KENTON MUSGRAVE, Senior Judge
Dated: March 21, 2008
New York, New York
4
See Restatement (Third) of Suretyship and Guaranty, § 43.