Wednesday, October 30, 2013

Did a Fight Just Break Out at the Court of Appeals?

Typically, I don't cover trade remedies cases here on the Customs Law Blog. But, now and then, something interesting happens on the trade side and it is worth a mention. That just happened.

A little background is necessary. The Court of International Trade has exclusive jurisdiction to review certain decisions of the Department of Commerce and the International Trade Commission relating to the imposition of antidumping and countervailing duties. When it does that, the CIT acts pretty much like a court of appeals; there is no trial, no witnesses, no objections and no findings of fact as there might be in a customs case. Rather, the CIT reviews the decision on the basis of the administrative record compiled at the agency. Generally speaking, if the agency decision is supported by substantial evidence and otherwise in accordance with law, the CIT will uphold the agency.

When a party appeals one of these cases from the CIT to the Court of Appeals for the Federal Circuit, the CAFC does exactly the same thing. The CAFC looks at the same record and applies the same test. If the CAFC finds that the agency decision is supported by substantial evidence on the record and is otherwise in accordance with law, the CAFC will uphold the decision.

Think about what that means for the work done by the judges of the Court of International Trade. If the CAFC starts at exactly the same point from which the CIT started, then the CIT decision is really just a speed bump on the inevitable road to the CAFC. By applying the same standard of review, the CAFC effectively creates the proverbial second bite at the apple that all losing lawyers want.

In most such circumstances, we can blame Congress for creating such an inefficient system. But, in this case, that is only half true. Congress started the problem by failing to include in any law anything about the standard of review the CAFC us to apply in these cases. That left the CAFC to figure it out, which it did in a case called Atlantic Sugar Ltd. v. United States (Fed. Cir. 1984). Since that time, the Court of Appeals has redone the work of the Court of International Trade. And, also since that time, a vocal group of judges and lawyers have decried the wastefulness of this system while others have defended it as a proper allocation of responsibility.

So much for the background.

In NSK Corp. v. International Trade Commission, this all came to a boil. The underlying dispute in the case is not important for us. What is important is that the CAFC denied a request for an en banc rehearing in a trade case. That allowed any judge of the Court to opine on any issue presented. The standard of review is present as an issue in every case (though not usually a controversial issue).

Enter Circuit Judge Evan Wallach, still relatively new to the Court of Appeals and, perhaps more important, late of the U.S. Court of International Trade. Judge Wallach wrote a dissenting opinion in which he took the opportunity to rail against Atlantic Sugar. He was joined in his dissent by Judge Reyena, who actually practiced as a trade lawyer, and Chief Judge Rader, who has spoken openly of his disdain for Atlantic Sugar in the past. Three judges do not make a majority, but they make for interesting reading.

Judge Wallach makes a few interesting points:

  • The standard being applied comes from the law applicable to the CIT, not the CAFC
  • Congress set the CIT standard of review to eliminate complex and burdensome review in the Court, which indicates a legislative intent to create an efficient, not duplicative, system
  •  In practical reality [my words, not his], the CAFC never truly ignores the CIT decision and the standard of review should acknowledge that
  • The standard has been inconsistently applied depending on the posture of the case, without any statutory basis for the differing analysis
  • The CIT has expertise in this area of law and its decisions deserves deference
  • Modern administrative law in the era of Chevron and Skidmore favors deference in part to properly allocate effort; duplicative review is inconsistent with that approach
The majority was not without a spokesperson, or five. According to the majority, Atlantic Sugar and de novo review is just fine. The majority has some interesting points of its own:
  • Every judicial circuit has adopted a similar approach to appellate review of an agency determination following review by a district court
  • The standard of review suggested by the dissent has only been applied by the Supreme Court in reviewing Circuit Courts of Appeals, an no other circuit has adopted it
  • Nothing in the trade or judicial statutes requires that these cases be handled differently than happens when other circuits undertake review of agency action
  • Even outside of administrative review, there are cases where appellate courts repeat the review of the trial court without deference
This last point has been an issue for me in trying to sort this out. I don't always litigate, but when I do, I prefer to litigate customs issues. The vast majority of those cases do not involve a dispute as to the facts. The judge only has to interpret the law and apply it to the agreed facts to resolve the case. That is summary judgment. When a party appeals from a decision on summary judgment, the appellate court does exactly the same thing. It is, once again, the proverbial second bite at the apple. No one, to my knowledge, has complained about this system.

But, summary judgment is different because there is no dispute of fact at all in play. In a trade case, the CIT (and then the CAFC) has to decide whether there is substantial evidence in the administrative record to support the conclusion reached by the agency. That does not mean that the CIT engages in fact finding or even weighing facts. But, it does mean that the sufficiency of the factual record is in dispute. Maybe that is sufficiently different from summary judgment to justify a different standard.

As the majority says, Congress knows how to write laws providing for judicial review. If Congress wanted the CAFC to do something other than what happens in many cases under the Administrative Procedure Act, it could have said so. Moreover, having now seen this controversy brewing, Congress knows how to fix it if Congress thinks there is a problem.

So now we wait and see whether any other wining party raises this issue in its defense of a CIT decision or whether Congress takes an interest. Either way, it will remain interesting to watch.



Tuesday, October 15, 2013

No Money, No Day in Court

E&S Express Inc. and Simon Ying v. United States, is another of those exasperating cases where a technicality prevents a judgment on the merits. That said, let me absolutely clear that the technicality involved is unquestionably the law and not something the Court could or should have ignored. Nevertheless, the result stinks for the importer.

Much like the most recent International Custom Products case involving imported white sauce, the sole question here is whether E&S has taken all the steps necessary to secure jurisdiction for the U.S. Court of International Trade to review a protest U.S. Customs and Border Protection denied. The two necessary steps are (1) a timely summons and (2) payment to Customs of all liquidated duties, fees, and taxes. It is the second prong that is the problem here.

E&S imported wooden bedroom furniture from China, which is subject to an antidumping duty order. At the time of entry, E&S deposited the estimated antidumping duties. Subsequent to importation, Customs billed  E&S for additional antidumping duties, to the tune of $76,895. That bill arrived after importation, after the goods had been sold, and about 10 months ater E&S dissolved. E&S protested the assessment, which was subsequently and separately rescinded by Commerce. But, E&S never paid the duties.

After Customs denied the protest, E&S filed suit in the Court of International Trade. The government then moved to dismiss based on E&S's failure to pay the duties.

E&S raised a number of arguments including that the retroactive application of the duty assessment against a dissolved company violated the company's due process rights. More interesting, E&S pointed out that its surety bond of $50,000 covered six of the nine entries at issue and, therefore, Customs could have collected duties on some of the entries. According to E&S, the Court should find the presence of the bond and the opportunity for Customs to collect sufficient to give the Court jurisdiction over at least six of the entries.

The Court did not see a way to do that. The statute, 28 U.S.C. § 2636(a)(1), is clear that the party seeking judicial review must pay the duties before getting its day in Court. E&S, having failed to satisfy that requirement, has not perfected its claim. The Court of International Trade, therefore, had no jurisdiction and the Court dismissed the case.

That said, this can be an onerous requirement. That is far more clear from the International Custom Products case. Perhaps Congress should consider an alternative whereby the plaintiff secures a bond to proceed in Court. That is how appeals work in many courts, which require a bond to secure payment of the judgment. From a litigation strategy position, E&S might have been able to work out a deal by which Customs denied only a single protest to serve as a test. E&S would then have been able to deposit a smaller sum of money and proceed to a judgment on the merits. I recognize that is nothing more than Monday morning quarterbacking, but it might have worked. Obviously, that would also depend on the good graces of Customs.

Lastly, if E&S is out of business, I wonder if there is any way for CBP to collect. If this case is really about protecting Mr. Ying, Counsel for E&S should be sure to read Trek Leather.