                                          Slip Op. 10-5

                UNITED STATES COURT OF INTERNATIONAL TRADE


UNITED STATES,

                       Plaintiff,

               v.
                                                   Before: Timothy C. Stanceu, Judge
TIP TOP PANTS, INC.,
                                                   Court No. 07-00171
               and

SAAD NIGRI,

                       Defendants.


                                     OPINION AND ORDER

[Dismissing defendant Nigri from the action and denying plaintiff’s motion for summary
judgment]

                                                                     Dated: January 13, 2010

       Tony West, Assistant Attorney General, Jeanne E. Davidson, Director, Patricia M.
McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division, United States
Department of Justice (David M. Hibey and Meredyth C. Havasy); Chris Yokus, Office of the
Assistant Chief Counsel, United States Customs and Border Protection, of counsel, for plaintiff.

       Ballon Stoll Bader & Nadler, P.C. (Vano I. Haroutunian) for defendants.

       Stanceu, Judge: Plaintiff brought this action under Section 592 of the Tariff Act of 1930,

as amended, 19 U.S.C. § 1592 (2006) (“Section 592”), to recover from defendants Tip Top

Pants, Inc. (“Tip Top”) and Saad Nigri a civil penalty of $55,636.90 and duties of $1,640.53, plus

interest, for alleged material false statements or acts, or material omissions, made in connection

with a single entry of apparel made in 2002. Compl. ¶¶ 1, 3, 8. Defendants make an untimely

motion to dismiss the complaint against Nigri for failure to state a claim upon which relief can be
Court No. 07-00171                                                                        Page 2

granted. Notice of Mot. to Dismiss the Compl. against Sadi Nigri for Failure to State a Claim

upon which Relief Can Be Granted pursuant to USCIT R. 12(b)(5), at 1 (“Mot. to Dismiss”).

Plaintiff moves for summary judgment against both defendants to recover on its penalty claim,

for which it alleges a degree of culpability of negligence. Pl.’s Mot. for Summ. J. (“Pl.’s Mot.).

Because plaintiff has failed to demonstrate that it is entitled to a judgment as a matter of law, the

court denies plaintiff’s motion. Because the complaint fails to state a claim under Section 592

against Nigri upon which relief can be granted, and because plaintiff has maintained its action

against Nigri on that complaint, the court sua sponte dismisses Nigri as a party defendant.

                                         I. BACKGROUND

       The court sets forth below the procedural background of this case and identifies certain

uncontested facts relevant to the court’s consideration of the two pending motions, as established

by the various submissions.

                   A. The Entry of the Merchandise for Consumption in 2002

       An entry for consumption was filed with United States Customs and Border Protection

(“Customs”) in 2002 at the port of Laredo, Texas for a shipment from Mexico of 954 dozen of

men’s denim cotton shorts and pants and 960 dozen of boys’ denim cotton shorts. Pl.’s

Statement of Material Facts pursuant to Rule 56(h)(1) ¶¶ 1-2 (“Pl.’s Statement of Material

Facts”); Pl.’s Mot. app. at 25-28 (setting forth the entry summary form and commercial invoices).

The entry summary form for the shipment showed a total entered value of $215,398 and a date of

entry of May 24, 2002; it listed as the importer of record “Tip Top Pant Inc, 1407 Broadway

Suite 521, New York, NY 10018.” Pl.’s Mot. app. at 25. The form set forth a tariff classification

of Subheading 6203.42.4050, Harmonized Tariff Schedule of the United States (“HTSUS”)
Court No. 07-00171                                                                       Page 3

(2002) for the men’s apparel items and Subheading 6203.42.4060, HTSUS for the boys’ shorts.

Id. app. at 25-26. Both provisions were subject to a General (MFN) duty rate of 16.8% ad

valorem; goods classified thereunder that qualified as originating goods under the North

American Free Trade Agreement (“NAFTA”) Implementation Act, as provided for in General

Note 12, HTSUS, were eligible for duty-free tariff treatment. Subheading 6203.42.40, HTSUS;

Subheading 9802.00.9000, HTSUS; General Note 12, HTSUS. The entry summary form made a

claim for duty-free treatment under Subheading 9802.00.9000, HTSUS.1 Pl.’s Mot. app.

at 25-26.

     B. The Customs Form 28 Request for Information and the Customs Form 29 Notice of
                                 Proposed Action

       On November 19, 2002, Customs issued to Tip Top a request for information (“Customs

Form 28”) requesting various items of documentation pertaining to the subject entry. Pl.’s

Statement of Material Facts ¶¶ 3-4; Pl.’s Mot. app. at 10-11. The Customs Form 28 also stated

as follows: “Due to the fact that this office is already reviewing your invalid claims, you are no

longer eligible for the provisions set forth under 19 CFR 162.74.” Pl.’s Mot. app. at 11. The

provisions of the Customs Regulations to which the Customs Form 28 cited are procedures for

prior disclosures made according to, inter alia, Section 592(c). Id.; see 19 U.S.C. § 1592(c)(4);

19 C.F.R. § 162.74 (2002).

       On January 16, 2003, Customs issued a notice of proposed action (“Customs Form 29”)

stating that it was proposing to disallow Tip Top’s claim for preferential tariff treatment under


       1
         Subheading 9802.00.9000 provided duty-free treatment for apparel goods assembled in
Mexico from fabric components wholly formed and cut in the United States, subject to certain
conditions. Subheading 9802.00.9000, Harmonized Tariff Schedule of the United States
(“HTSUS”) (2002); see Chapter 98, Subchapter II, U.S. Note 4, HTSUS.
Court No. 07-00171                                                                        Page 4

Subheading 9802.00.0090, HTSUS due to Tip Top’s failure to respond to the Customs Form 28

and allowing Tip Top twenty days to supply the documentation previously requested. Pl.’s

Statement of Material Facts ¶ 4; Pl.’s Mot. app. at 12. The Customs Form 29 also contained the

following statements: “This office will be disallowing all 9802.00.9000 claims, and duties will

be assessed at the general rate of duty. Your firm has made false claims under this program and

is subject to possible penalties.” Pl.’s Mot. app. at 12.

                     C. The Administrative Penalty and Protest Proceedings

       Customs issued a pre-penalty notice to Tip Top on May 7, 2003, citing “material false

statements, acts and/or omissions,” “HTS 9802.00.9000,” an alleged degree of culpability of

negligence, and a proposed penalty of $55,636.90, which it described as “two (2) times the

potential loss of revenue.” Pl.’s Mot. app. at 14; Pl.’s Statement of Material Facts ¶ 5. In the

section of the pre-penalty notice labeled “Material Facts Establishing Violation,” the pre-penalty

notice cited only one fact, Tip Top’s failure to respond to the Customs Form 28 “requesting

documentation to substantiate the 9802 claim.” Pl.’s Mot. app. at 14. Even though the notice

was a pre-penalty notice, and not a claim for penalty, the notice stated: “Importer has failed to

respond resulting in entry being rate advanced in the sum of $27,818.45 and penalty assessment.”

Id. Tip Top filed a response to the pre-penalty notice on June 26, 2003. Pl.’s Mot. app. at 15-20;

Pl.’s Statement of Material Facts ¶ 6. Among other arguments, the response claimed that the

apparel items on the entry at issue “were . . . entered duty-free as products of Mexico eligible for

duty-free treatment under the provisions of the North American Free Trade Agreement

(‘NAFTA’)” and that “[t]he entry in question was filed on the basis of a NAFTA blanket
Court No. 07-00171                                                                       Page 5

Certificate of Origin, covering the period of January 1, 2002 through December 31, 2002 . . . .”

Pl.’s Mot. app. at 17.

       Following the liquidation of the entry on April 4, 2003, Tip Top filed a protest and

request for further review on June 30, 2003.2 Id. app. at 76-82. The protest contested “the

decision of Customs to deny duty-free treatment to the merchandise imported and entered under

the captioned entry under HTSUS subheading 9802.00.9000, and under subheadings

6203.42.4050 [or] 6203.42.4060, as qualifying products of Mexico under NAFTA (North

American Free Trade Agreement)” and the assessment of duties at 16.8% ad valorem. Id. app.

at 77. The submissions of the parties do not indicate whether Customs has ruled on the protest.

       Customs issued a claim for a civil penalty in the amount of $55,636.90, in the form of a

notice of penalty (Customs Form 5955A) dated October 6, 2003 and a cover letter dated

October 7, 2003. Pl.’s Mot. app. at 60-62; Pl.’s Statement of Material Facts ¶ 9. The notice of


       2
           The court is unable to determine from the submitted documentation how the duties upon
liquidation were determined. If the merchandise were dutiable without the benefit of preferential
tariff treatment under General Note 12, HTSUS or Subheading 9802.00.9000, HTSUS, it would
appear from the information set forth on the entry summary that the duties owed would have
been $36,186.86, based on an entered value of $215,398 and a duty rate of 16.8% ad valorem.
See Pl.’s Mot. for Summ. J. (“Pl.’s Mot.) app. at 25-26 (setting forth the entry summary);
Subheading 6203.42.40, HTSUS. Plaintiff’s USCIT Rule 56(h) submission contains the
statements that “[o]n July 18, 2006, Tip Top paid a portion of the duties owed, or $33,842.45”
and that “[a]s of this filing, Tip Top still owes $1,695.36 in duties and interest.” Pl.’s Statement
of Material Facts pursuant to Rule 56(h)(1) ¶ 13 (“Pl.’s Statement of Material Facts”) (citing
Pl.’s Mot. app. at 122). Plaintiff submitted printed results of two bill number queries, one dated
December 28, 2006, Pl.’s Mot. app. at 122, and one dated September 9, 2006, id. app. at 123.
The former indicates that three separate bill numbers apply to the entry at issue in this case, one
of which is designated as “void.” Id. app. at 122. The latter indicates, for one of those three bill
numbers, a “total bill amount” of $33,842.45 and a “paid amount” of $33,842.45. Id. app.
at 123. That amount is the sum of an indicated “principal amount” of $28,056.70 and an
indicated “interest amount” of $5,785.75. Id. The December 28, 2006 bill number query result
shows an unpaid balance on a third bill of $1,695.36, but this amount is derived from the first bill
indicated, which is designated thereon as “void.” Id. app. at 122.
Court No. 07-00171                                                                        Page 6

penalty stated that Tip Top “entered or caused to be entered merchandise into the commerce of

the United States by means of material false statements, acts and/or omissions.” Pl.’s Mot. app.

at 62. The notice of penalty cited, as the reason for the “penalty assessment,” Tip Top’s failure to

respond to the Customs Form 28. Id. The cover letter stated as the basis for the assessment of a

penalty that “[a]lthough the entry is being protested, and you claim a correct NAFTA Certificate

of Origin submitted [sic], we find that the failure to provide the Certificate within the time

allowed is material to the orderly and proper assessment and collection of duties by Customs and

Border Protection and demonstrates negligence.” Id. app. at 60.

       On November 4, 2003, Tip Top filed with Customs a petition seeking cancellation or

substantial mitigation of the penalty. Pl.’s Mot. app. at 63-64 (setting forth Letter from Follick &

Bessich to Bureau of Customs & Border Prot. 1-2 (Nov. 4, 2003) (“Petition”)); Pl.’s Statement of

Material Facts ¶ 10. Tip Top advanced various arguments in its petition, among which was that

the failure to respond to the Customs Form 28 was the fault of its freight forwarder, South Texas

International (“STI”) of Laredo, Texas, upon whom Tip Top relied to maintain the required

records and respond to the request for information. Pl.’s Mot. app. at 65-66 (Petition 3-4). It

also argued that the merchandise at issue qualified for duty-free treatment under

Subheading 9802.00.9000, HTSUS, that documentation, although filed late, established that the

merchandise was entitled to duty-free tariff treatment, and that Tip Top had claimed duty-free

entry under NAFTA on the basis of facts, circumstances, and documents (albeit late filed) that

supported such entry. Pl.’s Mot. app. at 66-69 (Petition 4-7). Although arguing that no penalty

was warranted, it also argued that any penalty should be canceled or substantially mitigated

because of Tip Top’s excellent compliance record, because this was Tip Top’s first experience
Court No. 07-00171                                                                      Page 7

with importing merchandise duty-free under NAFTA, and because of Tip Top’s reliance “upon

professionals, customs brokers and freight forwarders who held themselves out as qualified and

informed in handling NAFTA importations and their documentary requirements.” Pl.’s Mot.

app. at 69 (Petition 7). The documentation submitted as evidence in support of plaintiff’s motion

for summary judgment contains no decision by Customs responding to the arguments in Tip

Top’s Petition.

       Plaintiff’s appendix contains a second Customs Form 5955A bearing a date of January 9,

2006, that plaintiff describes as an “amended penalty notice.” Id. app. at 121; Pl.’s Statement of

Material Facts ¶ 12. The text substantively is the same as the penalty notice dated October 6,

2003, except that the following sentence was added: “The fact that the fabric was cut and

assembled in Mexico disqualifies you from claiming 9802.00.9000; therefore, your HTS

9802.00.9000 claim was false.” Compare Pl.’s Mot. app. at 121 with id. app. at 60-62. In June

2006, Tip Top paid Customs $33,842.45. Pl.’s Statement of Material Facts ¶ 13; Pl.’s Mot. app.

at 122-23.

                                     D. Judicial Proceedings

       Plaintiff commenced this action by filing a summons and complaint on May 18, 2007.

With the consent of the parties, the court entered a scheduling order on May 6, 2008 and, on

several occasions since then, has granted unopposed motions to extend dates in the scheduling

order. Discovery was required to be completed by February 27, 2009. Order, Dec. 15, 2008. On

June 9, 2009, defendants moved to dismiss the complaint as to Nigri for failure to state a claim

upon which relief can be granted. Mot. to Dismiss 1. Two days later, plaintiff moved for
Court No. 07-00171                                                                        Page 8

summary judgment against both defendants for a civil penalty of $55,636.90 and unpaid duties

and interest of $1,640.53. Pl.’s Mot. 13.

                                            II. DISCUSSION

       The court exercises jurisdiction according to 28 U.S.C. § 1582, which grants the Court of

International Trade exclusive jurisdiction over actions to recover civil penalties claimed under

19 U.S.C. § 1592 and customs duties. See 28 U.S.C. § 1582 (2006).

    A. Plaintiff Has Failed to Demonstrate that It Is Entitled to Judgment as a Matter of Law

       Summary judgment “should be rendered if the pleadings, discovery and disclosure

materials on file, and any affidavits show that there is no genuine issue as to any material fact and

that the movant is entitled to judgment as a matter of law.” USCIT Rule 56(c). The court

concludes that the pleadings, discovery and disclosure materials on file, and affidavit do not

show that plaintiff is entitled to judgment as a matter of law.

1. Plaintiff Has Failed to Demonstrate that Its Penalty Claim Against Tip Top Was Perfected in
                       Accordance with the Requirements of Section 592

       Plaintiff is suing under Section 592(e) to recover a penalty on a claim arising from the

administrative penalty proceeding that Customs initiated by issuing the May 7, 2003 pre-penalty

notice. See 19 U.S.C. § 1592(e); Pl.’s Mot. app. at 13-14. The undisputed facts plaintiff

establishes in support of summary judgment do not demonstrate that Customs complied with the

requirements that Section 592 imposes. Among those statutory requirements is that a person to

whom a written penalty claim is issued “shall have a reasonable opportunity under section 1618

of this title [i.e., 19 U.S.C. § 1618] to make representations, both oral and written, seeking

remission or mitigation of the monetary penalty.” 19 U.S.C. § 1592(b)(2). Tip Top timely
Court No. 07-00171                                                                       Page 9

submitted a petition for remission or mitigation of the October 7, 2003 penalty claim. Pl.’s Mot.

app. at 63-70 (Petition at 1-8); Pl.’s Statement of Material Facts ¶ 10; see 19 C.F.R. § 171.2(b)(2)

(2009) (allowing 60 days for submission of a petition). Section 592(b)(2) requires that “[a]t the

conclusion of any proceeding under such section 1618, the Customs Service shall provide to the

person concerned a written statement which sets forth the final determination and the findings of

fact and conclusions of law on which such determination is based.” 19 U.S.C. § 1592(b)(2).

       Plaintiff has produced the second Customs Form 5955A, Pl.’s Mot. app. at 121, which

plaintiff describes in its Rule 56(h)(1) statement as an “amended penalty notice.” Pl.’s Statement

of Material Facts ¶12. The issuance of this document does not cure the apparent procedural

defect. The statute and regulations required that Customs issue to Tip Top a response to the

November 4, 2003 Petition, which sought not only remission but also presented arguments for

mitigation of the penalty. See Pl.’s Mot. app. at 63-70 (Petition at 1-8). Plaintiff has not shown

that Tip Top withdrew its Petition or that Customs ever ruled on that Petition.3 If agency action



       3
         Plaintiff’s statement of material facts pursuant to USCIT Rule 56(h)(1) does not state
that a decision under 19 U.S.C. § 1618 was issued. See Pl.’s Statement of Material Facts. In
support of its summary judgment motion, plaintiff states as follows:
        After review of Tip Top’s November 2003 letter [i.e., Tip Top’s petition in
        response to the written penalty claim], Customs contacted counsel for Tip Top
        and requested a conference regarding the petitions for relief. Customs also
        requested that Tip Top waive the statute of limitations. In a letter dated
        February 26, 2004, counsel indicated that the firm no longer represented Tip Top
        and gave Customs Tip Top’s last known mailing address, telephone, and facsimile
        numbers.
Pl.’s Mot. 5. These allegations are missing from the USCIT Rule 56(h)(1) statement, but even if
they were presumed to be true, they would not suffice. Although the statute and regulations grant
a person to whom a penalty claim has been issued the opportunity to make an oral presentation,
they do not authorize Customs to demand, as a condition of obtaining a decision on a petition for
remission or mitigation, that a person appear before Customs. See 19 U.S.C. § 1592(b) (2006);
19 C.F.R. § 171.3 (2009).
Court No. 07-00171                                                                              Page 10

on Tip Top’s Petition was still pending at the time Customs issued the second Customs Form

5955A, and if no decision under 19 U.S.C. § 1618 was ever issued, then the requirements of the

statute and the regulations were not satisfied. See 19 U.S.C. § 1592(b); 19 C.F.R. § 171.21

(2009) (“If a petition for relief relates to a violation of section[] 592 . . . , the petitioner will be

provided with a written statement setting forth the decision on the matter and the findings of fact

and conclusions of law upon which the decision is based.”). The second Customs Form 5955A

does not satisfy the statutory and regulatory requirements for a written statement setting forth the

final determination and the findings of fact and conclusions of law on which the determination is

based. See 19 U.S.C. § 1592(b); 19 C.F.R. § 171.21. On its face, the second Customs Form

5955A indicates that it is not a final determination, and it does not respond to the points in the

Petition. See Pl.’s Mot. app. at 121. The statute specifies that the “written statement” issued at

the conclusion of the proceeding conducted under 19 U.S.C. § 1618 is to be a determination

separate from, and subsequent to, the issuance of the written penalty claim. 19 U.S.C. § 1592(b).

        The United States, in an action brought under Section 592(e), commences a proceeding

“for the recovery of any monetary penalty claimed under this section,” i.e., Section 592. Id.

§ 1592(e). Congress directed that Customs adjudicate the penalty claim in an administrative

proceeding conducted under 19 U.S.C. § 1618 and issue a written decision concluding that

proceeding before any recovery action is brought in the Court of International Trade. 19 U.S.C.

§ 1592(b)(2) (requiring Customs to issue a “written penalty claim” and conduct thereon a

proceeding under 19 U.S.C. § 1618). Plaintiff has failed to show either that the § 1618

proceeding took place and culminated in a written decision or that some circumstance, not

apparent from the summary judgment motion, occurred that could have justified any failure to
Court No. 07-00171                                                                         Page 11

conduct a § 1618 proceeding. Therefore, plaintiff has not met its burden of demonstrating that it

“is entitled to judgment as a matter of law.” USCIT Rule 56(c).

 2. Plaintiff’s Rule 56(h)(1) Statement Contains Unsupported Factual Contentions But Was Not
                                   Controverted by Defendants

       Plaintiff’s failure to demonstrate that the penalty claim on which it seeks to recover

resulted from a proceeding conducted according to Section 592(b) is sufficient, by itself, to

preclude the court from granting plaintiff’s summary judgment motion. The court observes in

addition that the statement, made pursuant to USCIT Rule 56(h)(1) in support of plaintiff’s

motion, contains facts as to which there is alleged to be no genuine issue to be tried, and the

court further observes that certain of these stated facts are unsupported by plaintiff’s citations to

admissible evidence.4 The court notes that defendants did not file a statement satisfying the

requirements of USCIT Rule 56(h)(2) to controvert the statements in plaintiff’s Rule 56(h)(1)

statement.5 USCIT Rule 56(h)(3) deems such statements to be admitted. USCIT Rule 56(h)(3).

These statements, even when deemed admitted, do not establish that plaintiff is entitled to

judgment as a matter of law because of the absence of a showing that Customs conducted an

administrative proceeding under 19 U.S.C. § 1618 that fulfilled the requirements of

Section 592(b).




       4
        Each statement by the movant for summary judgment must be followed by citation to
evidence which would be admissible. USCIT Rule 56(h)(4).
       5
          In their opposition to plaintiff’s motion for summary judgment, defendants include a
statement of facts but do not present numbered paragraphs responding to the statements in
plaintiff’s Rule 56(h)(1) statement. See USCIT Rule 56(h)(2); Defs.’ Opp’n to Pl.’s Mot. for
Summ. J. 2-4 (“Defs.’ Opp’n”).
Court No. 07-00171                                                                        Page 12

       Plaintiff alleges that “Mr. Nigri testified that he did not have oversight over his broker,”

relying on a portion of the transcript, Nigri Dep. 55:3-17, Jan. 15, 2009, of the deposition

plaintiff took of Nigri. Pl.’s Statement of Material Facts ¶ 14 (citing Nigri Dep. 55:3-17, Jan. 15,

2009). In the cited passage, Mr. Nigri did not testify that he did not have “oversight” over his

broker. Instead, he testified that he did not “know more than [his] broker” or “as much as [his]

broker.”6

       Plaintiff also submits as an undisputed material fact that “Tip Top . . . admits that the

apparel was misclassified as duty free on May 24, 2002, and that Tip Top was the importer of

record for this transaction,” citing pages 8 and 119 of the appendix to plaintiff’s motion for

summary judgment. Id. ¶ 15 (citing Pl.’s Mot. app. at 8, 119). In the cited pages, which contain

Tip Top’s responses to plaintiff’s requests for admission, Tip Top did not make a general

admission that the apparel was misclassified as duty-free.7 There is an admission by Tip Top that


       6
         The portion of the transcript on which plaintiff relies reads as follows:
        Q. Oversight by Tip Top, over your broker?
        A. I don’t know more than my broker, no, I don’t. I relied on my broker and I rely
        on my lawyer.
        Q. Do you know as much as your broker?
        A. Me?
        Q. Yeah.
        A. I should? My question. If I should, I’ll learn, but I don’t.
        Q. Okay.
        A. I think custom and legality aspect is – – that’s why we use them, I guess.
Pl.’s Mot. app. at 125; Nigri Dep. 55:3-17, Jan. 15, 2009. Plaintiff submitted only pages 1 and
55 of the deposition transcript with its motion for summary judgment. See Pl.’s Mot. app.
at 124-25. Pages 1, 51, 53, and 54 are appended to Plaintiff’s Reply in Support of its Motion for
Summary Judgment. See Pl.’s Reply in Supp. of its Mot. for Summ. J. Ex. A. None of the
submitted pages establishes the absence of a genuine issue of fact as to whether Nigri “did not
have oversight over his broker.” See Pl.’s Statement of Material Facts ¶ 14.
       7
           Plaintiff submits documents including statements by Tip Top that can be construed as
                                                                                     (continued...)
Court No. 07-00171                                                                        Page 13

the imported apparel was misclassified under subheading 9802.00.9000 as duty-free because Tip

Top’s broker, J.O. Alvarez, Inc., identified the apparel with the incorrect entry number. Pl.’s

Mot. app. at 4-5 (referring to pages 4-5 of Tip Top Pants, Inc.’s Resp. to Pl.’s First Set of

Interrogatories). There is also an admission that the imported apparel was manufactured from

material shipped in roll form from the United States to Mexico. Id. app. at 8, 119. This

constitutes an admission that the merchandise did not meet a condition of entry under

Subheading 9802.00.9000, HTSUS because the apparel items were assembled from components

that were not cut in the United States. See Subheading 9802.00.9000, HTSUS (requiring that the

apparel goods be assembled in Mexico from fabric components wholly formed and cut in the

United States). It is not an admission that the merchandise did not qualify for duty-free treatment

as originating goods eligible for the NAFTA preference.8

   B. Because Plaintiff’s Complaint Fails to State a Valid Claim Against Nigri, and Because
  Plaintiff Has Continued this Action against Nigri on that Complaint, the Court Will Dismiss
                                   Nigri as a Party Defendant

       The court next considers defendants’ motion to dismiss Nigri as a party defendant.

Plaintiff argues in a footnote in its opposition to the motion to dismiss that Nigri has waived any


       7
         (...continued)
maintaining that the goods qualified for duty-free treatment under the NAFTA. See, e.g., Pl.’s
Mot. app. at 17 (in which Tip Top claimed during the administrative pre-penalty proceeding that
the apparel items “were . . . entered duty-free as products of Mexico eligible for duty-free
treatment under the provisions of the North American Free Trade Agreement (‘NAFTA’)” and
that “the entry in question was filed on the basis of a NAFTA blanket Certificate of Origin,
covering the period of January 1, 2002 through December 31, 2002”). The court is unable to find
on the entry summary or in other entry documentation a “written declaration” that the entered
goods qualified for NAFTA preferential tariff treatment. See 19 C.F.R. § 181.21 (2002).
       8
         The submissions of the parties do not address the question of whether defendant Tip
Top filed a retroactive claim for NAFTA preferential tariff treatment. See 19 U.S.C. § 1520(d)
(2006); 19 C.F.R. §§ 181.31, 181.32 (2003).
Court No. 07-00171                                                                           Page 14

defense under USCIT Rule 12(b) by moving to dismiss “nearly two years after he answered the

complaint.” Pl.’s Opp’n to Def. Saad Nigri’s Mot. to Dismiss 3 n.11 (“Pl.’s Opp’n”). Plaintiff is

correct that USCIT Rule 12(b) requires that the defense of failure to state a claim upon which

relief can be granted be made before a responsive pleading, if one is allowed. USCIT Rule 12(b).

The court notes, further, that under the original scheduling order entered in this action, motions

regarding the pleadings were to have been submitted by July 22, 2008. Scheduling Order, May 5,

2008. Although the Scheduling Order was amended, upon joint motion of the parties, to

continue discovery and for other reasons, the date for filing a motion to dismiss based on USCIT

Rule 12(b)(5) was not extended. See Order, Dec. 15, 2008. For both of these reasons,

defendants’ motion to dismiss the complaint as to Nigri is untimely. The court, therefore, will

not dismiss Nigri upon defendants’ motion.

        The court concludes, nevertheless, that the untimeliness of defendants’ motion does not

resolve all issues arising from plaintiff’s having brought an action, and having continued that

action, against Nigri. The court may dismiss a defendant from an action sua sponte when it

appears that a plaintiff is maintaining a groundless lawsuit against a defendant. See Anaheim

Gardens v. United States, 444 F.3d 1309, 1315 (Fed. Cir. 2006). It is, of course, improper for

any action to be maintained against a defendant where no valid basis for such an action could be

shown. See USCIT Rule 11(b)(2)-(3). For the present, the court sees no need to decide the

question of whether plaintiff possibly could show a basis for continuing this lawsuit against

Nigri. At this stage of the litigation, the court cannot rule out entirely the possibility that plaintiff

still could plead and prove facts under which Nigri could incur liability under Section 592 and
Court No. 07-00171                                                                         Page 15

that plaintiff could seek leave to amend its complaint accordingly.9 Nevertheless, the court does

see a need to decide at this time whether an action against Nigri should be allowed to continue on

the basis set forth in the complaint.

       In the circumstances presented here, the court’s dismissal of Nigri as a party defendant is

the appropriate result. Since bringing this action in May 2007, plaintiff has had ample

opportunity to conduct discovery. It also has had the opportunity to seek to amend its complaint

but has not chosen to do so. Instead, it has proceeded to move for summary judgment against

Nigri on that complaint, which alleges as to Nigri only one fact: “At all times relevant to the

matters described in the complaint, Saad Nigri10 was the Chairman and Chief Executive Officer

of Tip Top.” Compl. ¶ 6. Even if the court, for purposes of considering the sufficiency of the

complaint as to Nigri, accepts as true all well-pleaded facts in the complaint and draws all

reasonable inferences in plaintiff’s favor, the court still must conclude that the complaint states

no claim against Nigri upon which relief can be granted. Section 592(a)(1)(A) provides, in

pertinent part, that “no person . . . may enter, introduce, or attempt to enter or introduce any

merchandise into the commerce of the United States by means of– (i) any document . . . written

. . . statement, or act which is material and false, or (ii) any omission which is material.”

19 U.S.C. § 1592(a)(1)(A) (emphasis added). The complaint does not allege that Nigri entered,


       9
        Plaintiff would face a considerable procedural burden in seeking modification of the
scheduling order at this time so as to permit filing of a motion for leave to amend the complaint.
See USCIT Rules 15(a)(2), 16(b)(4).
       10
         In the text of certain pleadings, defendants refer to a person named Sadi Nigri, who was
the Chairman and Chief Executive Officer of Tip Top at the time of the subject importation and
move for dismissal of Sadi Nigri as a defendant. Notice of Mot. to Dismiss the Compl. against
Sadi Nigri for Failure to State a Claim upon which Relief Can Be Granted pursuant to USCIT
R. 12(b)(5), at 2 (“Mot. to Dismiss”); Defs.’ Opp’n 2.
Court No. 07-00171                                                                          Page 16

introduced, or attempted to enter or introduce any merchandise into the commerce of the United

States. It instead alleges the fact that the importer of the merchandise was Tip Top, which is an

uncontested fact in this case. Compl. ¶¶ 8-9; Pl.’s Statement of Material Facts ¶ 2; Pl.’s Mot.

app. at 8, 119. Although identifying Nigri as Tip Top’s Chairman and Chief Executive Officer at

the time of the 2002 importation, the complaint does not allege that Nigri did, or failed to do,

anything whatsoever. The complaint sets forth no facts upon which liability allegedly incurred

by Tip Top, based on negligence in importing the merchandise, could be imputed to Nigri. Thus,

not only does plaintiff’s complaint fail to plead facts which, if true, would entitle plaintiff to

recover from Nigri a penalty under Section 592, but it also can be fairly described as failing to

state any claim against Nigri.11

       For the reasons discussed above, the court is denying plaintiff’s motion for summary

judgment on grounds that do not relate specifically to the question of Nigri’s potential liability

under Section 592. Nevertheless, the court notes that nothing in plaintiff’s motion for summary

judgment establishes or alleges facts implicating Nigri in any violation of Section 592 that may

have occurred. Were the court not to dismiss Nigri as a party defendant, it potentially would be

allowing this case to go to trial against both defendants even though plaintiff, despite ample

opportunity, has failed to plead, develop, or support any claim against one of those defendants,

Nigri, that rests on an adequate basis in law or fact.

       In opposing dismissal of Nigri, plaintiff makes only one argument other than that

defendants’ motion to dismiss is untimely. Plaintiff argues that “[c]orporate officers have



        11
        In addition, the complaint, in its demand for relief, seeks a judgment against Tip Top
and makes no mention of Nigri. Compl. 4.
Court No. 07-00171                                                                         Page 17

repeatedly been held liable for violations that were committed in the capacity of their

employment.” Pl.’s Opp’n 4 (citing United States v. Priority Prods., Inc., 793 F.2d 296, 299

(Fed. Cir. 1986), United States v. Matthews, 31 CIT 2075, 2082-83, 533 F. Supp. 2d. 1307,

1313-14 (2007), and United States v. Golden Ship Trading, 22 CIT 950, 956 (1998)). Although

plaintiff is correct in its contention that officers of a corporation, in some factual circumstances,

have been held liable under Section 592, neither that contention nor the cases plaintiff cites

address the shortcoming in plaintiff’s case, apparent from plaintiff’s complaint and its motion for

summary judgment, pertaining to any potential liability of Nigri.

       United States v. Priority Products, Inc. is not on point. That case held that the failure by

Customs to serve corporate officers, directors, or shareholders of a corporation with written pre-

penalty or penalty notices during the administrative penalty proceeding does not deprive the

Court of International Trade of subject matter jurisdiction over a complaint against those persons

to recover a civil penalty originally assessed against the corporation. See Priority Prods.,

793 F.2d. at 300. The case also concludes that the failure to include the individual defendants in

the pre-penalty and penalty notices, where those defendants had actual notice of the proceeding,

was not a deprivation of due process. Id. at 301. The case does not hold that a party’s serving as

an officer of a corporation at the time the corporation imports merchandise is, by itself, sufficient

to establish that officer’s liability for acts committed by the corporation that are found to be in

violation of Section 592. Nor did Priority Products involve the issue of the sufficiency of

pleadings in an action to recover a penalty sought under Section 592.

       United States v. Matthews and United States v. Golden Ship Trading are not binding

precedent, and both are readily distinguished from this case. See Matthews, 31 CIT 2075, 533 F.
Court No. 07-00171                                                                         Page 18

Supp. 2d. 1307; Golden Ship Trading, 22 CIT 950. In Matthews, corporate and individual

defendants were found jointly and severally liable for violations of Section 592 based on

fraudulent false statements of origin that were made in the entry documentation to avoid payment

of antidumping duties on imports of silicon metal from China. See Matthews, 31 CIT at 2076,

533 F. Supp. 2d. at 1308 (ordering summary judgment for the United States “[b]ecause

Defendants knowingly and purposely misrepresented the country of origin on the entries in

question in order to avoid antidumping duties that would have been assessed upon that

merchandise by Customs.”). The Court of International Trade cited specific acts committed by

the individual defendant Matthews in furtherance of the fraudulent scheme and, on the part of

individual defendant McGuire, joint action with Matthews pursuant to a common plan. Id.

at 2080-81, 533 F. Supp. 2d. at 1312-13. Like Priority Products, Matthews involved issues other

than the issue of what factual allegations against an individual defendant suffice to avoid

dismissal for failure to state a claim upon which relief can be granted.

       In Golden Ship Trading, which also involved allegations of false statements of country of

origin, the Court of International Trade denied the motion of defendants to dismiss individual

defendant Wu that was made, in part, under USCIT Rule 12(b)(5). Golden Ship Trading, 22 CIT

at 951. In contrast to the facts of this case, the government’s complaint in Golden Ship Trading

alleged a specific act on the part of the individual defendant, stating that this individual “signed

the country of origin declaration falsely, stating that the country of origin was the Dominican

Republic, and that these materially false statements, acts and/or omissions were performed

without due care and constitute negligent violations of 19 U.S.C. § 1592.” Id. Golden Ship

Trading not only is distinguishable from this case but also was decided prior to the decisions of
Court No. 07-00171                                                                          Page 19

the Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007), and Ashcroft v.

Iqbal, 129 S. Ct. 1937 (2009). To avoid dismissal for failure to state a claim upon which relief

can be granted, the “[f]actual allegations must be enough to raise a right to relief above the

speculative level, . . . on the assumption that all the allegations in the complaint are true (even if

doubtful in fact).” Bell Atlantic, 550 U.S. at 555.

       In support of its motion for summary judgment against Nigri, plaintiff reiterates the same

arguments it makes in opposing defendants’ motion. Pl.’s Reply in Supp. of its Mot. for Summ.

J. 6-7. Plaintiff adds, however, that “evidence beyond the complaint . . . shows that Mr. Nigri

was not only the founder, chairman and CEO, but also one of two 50 percent shareholders, one of

two corporate officers, and one of only two employees for the company.” Id. at 6. Plaintiff also

states that “defendants do not dispute that no one at Tip Top knew or possessed more

information than Mr. Nigri concerning the day-to[-]day operations of Tip Top.” Id. Plaintiff’s

arguments fail in two respects. First, and most obviously, these allegations are not in the

complaint. Second, even were these allegations in the complaint, plaintiff still would not have

pleaded or demonstrated a basis on which Nigri, in his personal capacity, would have incurred

any liability for a negligent violation of Section 592 that Tip Top may have committed.

       In summary, the court will not allow this case to go to trial against Nigri on the complaint

before it. Even if the court assumes the truth of every allegation made against Nigri in plaintiff’s

complaint, the court still is left with nothing beyond Nigri’s serving as Chairman and Chief

Executive Officer when Tip Top entered merchandise that, the government alleges, was entered

according to a material false statement or act that occurred as a result of negligence.
Court No. 07-00171                                                                      Page 20

                                        III. CONCLUSION

       For the reasons discussed in the foregoing, the court will deny plaintiff’s motion for

summary judgment and dismiss defendant Nigri from this action.

                                             ORDER

       Upon consideration of all papers and proceedings herein, it is hereby

        ORDERED that all claims in the complaint be, and hereby are, dismissed to the extent
that they seek relief against defendant Nigri, who is hereby dismissed from this action as a party
defendant; it is further

         ORDERED that the Clerk of the Court be, and hereby is, directed to amend the caption
in this case to read “United States, Plaintiff, v. Tip Top Pants, Inc., Defendant”; it is further

     ORDERED that the Rule 56 motion of plaintiff for summary judgment be, and hereby is,
DENIED; and it is further

       ORDERED that counsel for plaintiff, after consulting with counsel for defendant, shall
submit, by February 12, 2010, a joint proposed schedule to govern the remainder of these
proceedings. Should counsel be unable to agree upon a proposed schedule, plaintiff shall notify
the court of that fact by February 12, 2010.

                                                     /s/ Timothy C. Stanceu
                                                     Timothy C. Stanceu
                                                     Judge

Dated: January 13, 2010
       New York, New York
