Tuesday, April 17, 2012

HMT Still in the Court

The U.S. Court of Appeals for the Federal Circuit, in a two to one decision, has denied Ford Motor Company additional HMT refunds for the pre-July 1, 1990 period and the so-called disputed claims after that date. This is a long and complicated story, and I am just back from a reunion of former judicial clerks at the Court of International Trade. That means you will not get the long version of this decision.

What it comes down to is that Ford, like many other companies, paid Harbor Maintenance Tax on exports from the U.S. The Supreme Court eventually decided that the HMT, as applied to exports, was unconstitutional. As a result, a lot of companies received very healthy refund checks from the U.S. and several customs lawyers bought sports cars. But, there have been lingering issues over the evidence necessary to establish a right to a refund for HMT payments made prior to July 1, 1990 and for certain disputed claims thereafter.

Normally, when the federal government has records of some transactions, the public is entitled to rely on these records to establish whatever facts they cover. But, with respect to HMT, Customs knows that there are errors in the pre-July 1, 1990 data. Those errors come from the exporters who reported the data, the banks that collected and transmitted the data to Customs, and from Customs. Also, not all HMT payments were unconstitutional. Some related to imports and domestic traffic. So, to support a claim for an HMT refund from this period, Customs passed a regulation under which it would accept:

other documentation offered as proof of payment of the fee, such as cancelled checks and/or affidavits from exporters attesting to the fact that all quarterly harbor maintenance tax payments made by the exporter were exclusively for exports.

Ford gathered information from Customs via a FOIA request and supplemented that data with two affidavits from knowledgeable employees (aside: Hey, Paul. Hope all is well.). These statements supported the government's data and confirmed Ford's internal quality recordkeeping and procedures. Despite the added confirming documents, Customs denied the claims. The primary basis for this appears to have been that the source for the FOIA data was the same Customs' data the the Federal Circuit held was unreliable in a previous case brought by Chrysler. The Federal Circuit agreed that these documents were not sufficient to "clearly prove" that the payments were for export HMT because they "do not rule out the possibility of all exporter errors" or errors by bank personnel. Accordingly, the Court held the record evidence to be insufficient to support the claim.

Regarding the disputed claims in the post-July 1, 1990 period, the regulations require the exporter to produce documents demonstrating the entitlement to the refund. The regulation (19 CFR 24.24(e)(4)(iv)(C)) does not specify what documents are necessary to support a claim but does state that Customs will accept documents the agency "accepted with the payment." In this case, Ford argued that it did not have to provide the exact documents Customs accepted, rather that it needed to show documents of the same type that Customs accepted. The Federal Circuit agreed, but still held that Ford's documents were insufficient to show that Ford actually submitted the documents. Additional evidence would be required to show that. So, the Federal Circuit affirmed the Court of International Trade and Ford is out $2.5 million it certainly has a good faith belief that it paid.

There is a strong dissent in this case from Circuit Judge O'Malley.  Basically, Judge O'Malley points out that the majority opinion is based on some assumptions about what the data shows and how reliable the data is. These assumptions, according to the dissent, are not consistent with the rule that on summary judgment (which is the posture of this case), the court must make the inferences that are most favorable to Ford. Further, the majority appears to be making decisions regarding the weight of the evidence presented rather than deciding the case on the legal arguments. As Judge O'Malley views it, the Federal Circuit should not be weighing the evidence but only deciding whether there is a genuine issue of material fact, which she believes is present. As a result, she believes that the federal Circuit wrongly decided the case on the merits rather than sending it back for a trial. All in all, I have to say I agree with her.

1 comment:

Sarah said...

It sounds to me as though the evidence in question isn’t necessarily 100% clear in the first place. I could be misreading it, but the only forms to be examined are riddled with errors made by various organizations at various points in time anyway? Is it really possible to prove fault in that case?