White Sauce Attorneys' Fees Upheld

You may recall that the Court of International awarded attorneys fees to the plaintiff in International Custom Products v. United States. This case has a very complicated litigation history. I will not review that here. You should go back and read the original post about the CIT decision on fees. Now, the Court of Appeals for the Federal Circuit has affirmed the CIT's decision. That is a substantial victory for the plaintiff.

What you need to know is that Customs and Border Protection issued a binding ruling to ICP on the classification of its "white sauce." Customs subsequent issued a Notice of Action reclassifying unliquidated entries under a different provision. CBP did not take steps to revoke or modify the prior ruling before taking this action. As a result of the reclassification, and the resulting application of dairy quota, the duty payable on this merchandise increased by 2400%. The subsequent litigation resulted in five judicial opinions including two prior decision of the Court of Appeals.

Under federal law, a court shall award attorneys fees to the non-governmental prevailing party unless the position of the United States "was substantially justified" or there are special circumstances making an award unjust. A position is substantially justified if it could satisfy a reasonable person. Stated in the positive, what that means is that a prevailing party in a case against the United States can be awarded fees where the government took an unreasonable position in the litigation or the administrative process.

The CIT held that Customs' use of the Notice of Action was rooted in its desire to avoid the more complicated, but required, process of revoking the ruling. That, according to the CIT, was not reasonable.

On appeal the United States raised several technical arguments. The most interesting of these is that because the Court of International Trade ruled in favor of the United States on the plaintiff's motion for summary judgment, thereby letting the case go to trial, the government's position was necessarily reasonably. The Federal Circuit had not previously addressed this question and, therefore, looked to guidance in the decisions of other circuits. The Seventh Circuit has held that surviving a motion for summary judgment creates a presumption that the position is reasonable; but that presumption can be rebutted. The Federal Circuit did not go so far as to find a presumption. Rather, it held that it must review the record as a whole to find reasonableness.

That probably brings this part of the case to an end. For those of us who litigate customs issues, this serves as a good reminder that it is possible to get fee awards when the U.S. has taken an unreasonable position. That is an unusual circumstance, but it is good to know the law.


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