Friday, May 31, 2013

The Problem with Test Cases: Deckers

UPDATE: On rare occasions, this blog generates a more detailed discussion about a particular case. This is one of those occasions. After talking it through with a respected and knowledgeable practitioner, I think a clarification is necessary. That clarification is as follows: This decision got me thinking about test cases and what it means to suspend a case under a designated test case. I used that opportunity to expound on this unique aspect of customs practice. But, in doing so, I did not make it clear that the result in Deckers did not depend on the fact that it had been suspended under a test case. Rather, the plaintiff filed a complaint. That moved the case out from suspension and after which it proceeded along as would any other case at the Court of International Trade. The decision in the test case did not ipso facto control the outcome. Instead, the Court decided the government's motion for summary judgment on the merits, which was also consistent with the decision in the test case. That is a meaningful distinction that I am happy to clarify. That said, I have made some adjustment below.

The Court of International Trade has a few unique rules of practice. Chief among those is Rule 84, which permits a party to designate an action as a "test case" and suspend other cases pending the outcome of the test case. In customs litigation, this can be a handy tool. As you might imagine, most importers do not have a single entry or even a single protest worth bringing to Court. Typically, it is hard to justify litigation unless there are many entries at issue. Obviously, that may take time to pile up and all the while the statute of limitations is running. Also, it is usually highly inefficient to have to litigate each denied protest separately if the same issue of law and facts are presented.

The test case procedure can even be used by an unrelated party importing similar merchandise. That, by the way, is a very cost-efficient way to challenge Customs and Border Protection. The second importer can effectively ride the coat tails of the first importer who is pursuing the case. Of course, the downside is that you have little control over how the case is presented. And, if the plaintiff in the test case loses, the second importer may have trouble getting out from under it.

I am thinking about test cases because of Deckers Corp. v. United States. That case involved the tariff classification of athletic sandals. The test was case decided in 2007 and affirmed in 2008.  I am shocked to say that I apparently did not do a post on the test case. I find that very hard to believe.

In the new decision, the United States has moved for summary judgment to dismiss in a previously suspended case on the basis of the decision in the test case. According to the United States, consistent with the earlier decisions, the athletic sandals are "shoes" but are not "tennis shoes, basketball shoes, gym shoes, training shoes and the like" for purposes of tariff classification because they have open toes and open heels. Consequently, the government maintains that as a matter of law the sandals cannot be classified in 6404.11.80, no matter how useful they may be in athletic endeavors.

Faced with the decision in the test case that sports sandals are not like the listed exemplars in 6404.11.80, the Court of International Trade turned to the motion to suspend the current case under the test case. In that motion, the plaintiff stated that the "test case involves the same plaintiff, the same defendant, the same class or kind of merchandise, i.e., sports sandals, and the same claims."

Thus, the Court of International Trade found that the controlling law and these representations did not permit the plaintiff to recover. Consequently, it dismissed the case.

In this case, the plaintiff lifted the suspension by filing a complaint in an effort to pursue the case on its merits. Consequently, it is true that the status of the case having been suspended did not control the outcome. Nevertheless, the Court did take note of plaintiff's prior representations that the case involved the same class or kind of merchandise. That is a somewhat cautionary tale about the test case/suspension process; although probably not as big a deal as my first draft of this post would have you think.

Procedurally, there are alternatives for plaintiffs. One possibility is to only suspend cases when it becomes necessary to take some action after filing a summons (which is usually 18 months). See Rule 83. This can avoid putting all of your denied protest eggs in one test case basket. Should the importer lose the first test case, it can (within limits) pursue the remaining cases as if the test case never happened. That is because, unlike possibly any other court in the country, the Court of International Trade does not accept the legal notion of res judicata. That means, as long as the case is not frivolous, either side can bring up the same issue again. At some point, stare decisis kicks in and the plaintiff risks seriously annoying the Court. But, as a technical matter, serial litigation of the same issue is possible and sometimes beneficial at the Court of International Trade.

If you are interested in the background on res judicata in the Court of International Trade, at least from the perspective of a Department of Justice Lawyer, take a look at this paper from the 15th Judicial Conference of the Court.

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