United States v. Selecta Corp., LLC

Slip Op. No. 19-4
UNITED STATES COURT OF INTERNATIONAL TRADE
UNITED STATES,
Plaintiff,
Before: Timothy C. Stanceu, Chief Judge
v.
Court No. 11-00089
SELECTA CORPORATION, LLC
d/b/a/ Dickies Medical Uniforms,
Defendant.
[Granting plaintiff’s motion for a judgment by default]
Dated: January 11, 2019
Antonia R. Soares, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice, of Washington, D.C., for plaintiff. With her on the brief were Joseph H.
Hunt, Assistant Attorney General, Jeanne E. Davidson, Director, Franklin E. White, Jr.,
Assistant Director. Of counsel was Judith M. Ubando, Attorney, Office of Associate Chief
Counsel, U.S. Customs and Border Protection, of Houston, TX.
OPINION
Plaintiff moves for entry of a judgment by default (“default judgment”) in an action
brought to recover a civil penalty under section 592 of the Tariff Act of 1930, as amended
(“Tariff Act”), 19 U.S.C. § 1592 (2000).1 Pl.’s Renewed Mot. for Default J. (Oct. 1, 2018), ECF
Nos. 24 (conf.), 26 (public) (“Pl.’s Mot.”). The court grants a default judgment for a penalty in
the amount plaintiff seeks, plus post-judgment interest as provided by law, and costs.
1
Further citations to the Tariff Act are to the relevant portions of the 2000 edition of the
United States Code.
Court No. 11-00089 Page 2
I. BACKGROUND
Plaintiff’s amended complaint seeks $51,102, plus post-judgment interest and costs,
stemming from administrative penalty procedures conducted by Customs and Border Protection
(“Customs”) against defendant Selecta Corporation, LLC (“Selecta”). Am. Compl. (July 19,
2016), ECF No. 21. Plaintiff filed proof of service of the amended complaint on Selecta’s Chief
Executive Officer. Proof of Service (Aug. 23, 2016), ECF No. 23. In response to an inquiry by
a representative of the Clerk of the Court, plaintiff informed the office of the Clerk of its
intention to file a motion (i.e., an application) for a judgment by default by July 2018 and later
indicated that its motion would be filed on October 1, 2018.
Plaintiff’s application for a default judgment, like its amended complaint, seeks $51,102,
plus post-judgment interest and costs. Pl.’s Mot. Plaintiff has not filed an affidavit or other
submission addressing a failure on the part of Selecta to plead or otherwise defend. See USCIT
R. 55(a) (“When a party against whom a judgment for affirmative relief is sought has failed to
plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must
enter the party’s default.”). Because no entry of default had been entered with respect to the
amended complaint, the court, on January 4, 2019, directed the Clerk of the Court to enter
defendant’s default in this case. Order (Jan. 4, 2019), ECF No. 28. Default was entered on
January 8, 2019. Entry of Default (Jan. 8, 2019), ECF No. 29.
II. DISCUSSION
The court will proceed to rule on plaintiff’s application for a default judgment. In doing
so, the court will presume as true all well-pled facts as set forth in the amended complaint. See
Taser Int’l, Inc. v. Phazzer Elecs., Inc., Appeal No. 2017-2637, at 13, 2018 WL 5309940, at *6
Court No. 11-00089 Page 3
(Fed. Cir. Oct. 26, 2018) (unpublished) (citing Cotton v. Mass. Mut. Life Ins. Co., 402 F.3d 1267,
1278 (11th Cir. 2005)).
The amended complaint alleges that Selecta, through prior disclosures made on April 1
and October 30, 2009, admitted to having misclassified and undervalued certain imported
merchandise on 1295 entries of certain wearing apparel, principally medical scrubs and lab coats,
that it made through twelve ports of entry during the period between April 17, 2004 and
April 17, 2009. Am. Compl. ¶¶ 4-6. Selecta calculated a loss of revenue to the government of
$834,879.98. Id. ¶¶ 7, 12. Selecta tendered this amount on October 30, 2009 and, on April 5,
2010, tendered an additional $4,814.40 determined by Customs to remain owing on the entries
subject to the prior disclosures. Id. ¶¶ 15, 17, 19. Customs determined that Selecta had satisfied
the requirements for a prior disclosure, impliedly accepting that the total tendered amount of
$839,694.38 represented the total loss of revenue. Id. ¶¶ 17-18.
In 2010, Customs issued a pre-penalty notice of its intention to seek a penalty of $51,102,
based on a degree of culpability of negligence and calculated as the amount of interest on the
previously underpaid duties and fees, id. ¶ 20, and subsequently issued a notice of a penalty
claim in that amount, id. ¶ 21. Selecta did not respond to the penalty claim and has not tendered
any amount in addition to its earlier tenders. Id.
Plaintiff alleges that Selecta’s violations of section 592(a) of the Tariff Act occurred due
to negligence. Id. ¶ 23. In an action brought under section 592(e) to recover a civil penalty, the
United States has the burden of establishing that the acts or omissions constituting a violation of
section 592 occurred, and once that burden is met, the defendant has the burden of showing that
they did not occur due to negligence. 19 U.S.C. § 1592(e)(4). The amended complaint alleges
that material false statements occurred, and, moreover, alleges that the occurrence of the material
Court No. 11-00089 Page 4
false statements made upon entry of the merchandise were admitted in Selecta’s prior disclosure
submissions. Am. Compl. ¶¶ 12, 19. Defendant has made no showing that the false statements
were not the result of negligence on its part.
Under 19 U.S.C. § 1592(c)(4)(B), upon a valid prior disclosure, the maximum penalty for
a negligent violation is the interest, computed from the date of liquidation at the prevailing rate
of interest applied under section 6621 of Title 26, U.S. Code, on the amount of lawful duties,
taxes, and fees of which the United States was deprived. Customs determined that amount,
computed from the dates of liquidation of the entries until payment by Selecta, as $51,102.
Am. Compl. ¶ 18. Plaintiff alleges that this amount “represents the interest computed on the
underpaid duties and fees, totaling $839,894.38.” Id. ¶ 24.
The amount of a penalty is determined by the court de novo. 19 U.S.C. § 1592(e)(1).
The court may consider various factors, including aggravating and mitigating factors, in
determining the amount of penalty, up to the statutory maximum amount. In this case, while the
statute characterizes the interest amount calculated according to 19 U.S.C. § 1592(c)(4)(B) as a
maximum “penalty,” the interest plaintiff seeks is only the amount that would make the
government whole for the unpaid duties and fees accruing from the dates of liquidation up until
the dates of the tenders, made on October 30, 2009 and on April 5, 2010.
Defendant having failed to respond in any way since the issuance of the penalty claim
and throughout the pendency of this litigation before the court, the court has no basis to conclude
that the penalty the government seeks, calculated as the amount of the interest from the dates of
liquidation to the dates of payment, would be inequitable. Based on the government’s loss of the
use of funds, the court concludes that the imposition of the penalty sought by plaintiff is, rather,
the appropriate disposition of this action.
Court No. 11-00089 Page 5
III. CONCLUSION
For the reasons set forth above, the court will enter judgment for plaintiff for a civil
penalty in the amount of $51,102, plus post-judgment interest as provided by law, and costs.
/s/Timothy C. Stanceu
Timothy C. Stanceu
Chief Judge
Dated: January 11, 2019
New York, New York