Friday, February 26, 2016

Discovery Dispute at the Court of International Trade

Discovery is the legal process through which each side to a law suit asks the other side to disclose the facts relevant to the claims and defenses. It usually consists of depositions of knowledgeable witnesses, written questions and requests for production. Discovery disputes are unusual in customs litigation. More often than not, the parties can reach an agreement on the material facts. The dispute is usually, but not always, over the conclusions to be reached from those facts after the applicable law is properly interpreted. When a discovery dispute does arise, people notice (and by "people" I mean "me").

Meyer Corporation, U.S. v. United States is about a discovery dispute. The underlying issue is that Customs and Border Protection audited Meyer and determined that its application of the first sale methodology of valuation was unacceptable. If you don't know what that means, go back and read this classic post from 2005. Customs also denied duty-free claims under the GSP. After the audit went negative, the importer ask Regulatory Audit to seek internal advice from Customs' headquarters. That internal advice resulted in ruling  HQ H088815 (Sept. 28, 2011)(note that the ruling is there but seems to be posted without all of the proper formatting). The ruling went against the importer, and the lawsuit followed.

From Investigations

In discovery, counsel for the plaintiff sought essentially all of the documents in Customs' possession relating to the audit and to the internal advice. That resulted in the production of nearly 10,000 pages and Excel files. Some of the contents were redacted on the basis of governmental privileges covering the deliberative process and law enforcement techniques. In addition, business proprietary information, attorney work product, and attorney-client privileged material was redacted. As required, the government produced a detailed privilege log explaining the reasons for the redactions. This was followed by eight depositions for current and former Customs personnel, at least one of whom was technically speaking for the agency.

Plaintiff then filed a motion to compel Customs to provide un-redacted versions of the documents.

The deliberative privilege is intended to protect the government's decision-making process. It gives governmental officials the ability to freely and openly discuss matters of policy without fear that those discussions will be subject to discovery. In other words, it hides what goes into the sausage that is administrative rule making and forces lawyers to challenge the result. Advisory opinions, recommendations, and inter-office skirmishes get ground up into the final product. Litigants are generally not permitted to hunt around for the helpful scrap of veal that went into the bratwurst.

To be covered by deliberative privilege, the relevant department head (or a designee) must formally assert the claim in an affidavit describing the information and his or her actual consideration of it. In this case, the affidavit came from the Acting Executive Director of Regulations and Rulings. In other words, one of the officials involved in making the decision.

The deliberative process is not absolute. If there is no other source for some information and the plaintiff's need for it outweighs the harm to the process, the information is discoverable. Further, if those deliberative documents are somehow applied by the decision maker as if they were law, the documents are discoverable. In other words, Customs can't say "we have a secret memo on this issue that says you lose."

The Court did not discuss the law enforcement privilege claim other than to say that the rule for asserting it is similar. So, I will leave that alone as well.

The Court of International Trade took the practical step of actually looking at the disputed un-redacted documents, without disclosing them to the plaintiff. According to the Court, all of the redactions are of business proprietary information, agency proprietary information, or work product prepared in anticipation of making one or more of these decisions.

Based on that review and the OR&R declaration, the Court determined that the claim of privilege was appropriate. None of the information had been made public elsewhere and no exceptions to the privilege apply.

The decision ends with "To the extend the plaintiff disagrees with Customs' analysis and denial of its protest, the burden in on the plaintiff to establish its entitlement to first-sale and GSP treatment in accordance with the facts and law established during judicial review that is de novo." My personal translation of that is "Hey plaintiff, you have the facts of your transactions, bring them to court and prove your case."

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