                                           Slip Op. 20-100

                   UNITED STATES COURT OF INTERNATIONAL TRADE


    UNITED STATES,

           Plaintiff,

    v.
                                                  Before: Jennifer Choe-Groves, Judge
    GREENLIGHT ORGANIC, INC., and
    PARAMBIR SINGH “SONNY”                        Court No. 17-00031
    AULAKH,

           Defendants.


                                              OPINION

[Denying Defendant Aulakh’s motion to dismiss.]
                                                                        Dated: July 14, 2020

William Kanellis and Kelly Krystyniak, Trial Attorneys, Commercial Litigation Branch, Civil
Division, U.S. Department of Justice, of Washington, D.C., for Plaintiff United States. With
them on the brief were Joseph H. Hunt, Assistant Attorney General, Jeanne E. Davidson,
Director, and Patricia M. McCarthy, Assistant Director.

Angela M. Santos, Robert B. Silverman, and Joseph M. Spraragen, Grunfeld Desiderio Lebowitz
Silverman & Klestadt LLP, of New York, N.Y., for Defendant Parambir Singh Aulakh.1

          Choe-Groves, Judge: Plaintiff United States (“Plaintiff” or “Government”) brings this

19 U.S.C. § 1592 civil enforcement action seeking to recover unpaid duties and to affix

penalties, alleging that Greenlight Organic, Inc. (“Greenlight”) and Parambir Singh “Sonny”

Aulakh (“Aulakh” or “Defendant Aulakh”) (together, “Defendants”) imported wearing apparel

into the United States fraudulently. Second Am. Compl. ¶ 1, ECF No. 124. Pending before the

court is Defendant Aulakh’s Motion to Dismiss Plaintiff’s Second Amended Complaint under

USCIT Rule 12(b)(6). Def.’s Mot. to Dismiss & Mem. of Law in Supp. of Mot. to Dismiss


1
    Greenlight Organic, Inc. is not currently represented by counsel.
Court No. 17-00031                                                                             Page 2


(“Def. Br.”), ECF No. 128. Plaintiff opposed Aulakh’s motion. Pl.’s Opp’n to Def.’s Mot. to

Dismiss (“Pl. Opp’n”), ECF No. 129. Aulakh replied. Reply Mem. in Supp. of Def.’s Mot. to

Dismiss Second Am. Compl. (“Def. Reply”), ECF No. 130.2 For the reasons set forth below,

Aulakh’s motion is denied.

    I.      BACKGROUND

         The court presumes familiarity with the facts set forth in its prior opinion dismissing the

First Amended Complaint with leave to amend and now recounts those facts relevant to the

court’s review of the Motion to Dismiss the Second Amended Complaint. See United States v.

Greenlight Organic, Inc., 43 CIT ___, 419 F. Supp. 3d 1298, 1301–02 (2019) (“Greenlight II”).

         In Greenlight II, Aulakh moved to dismiss the First Amended Complaint for failure to

exhaust administrative remedies and for failure to state a claim. Id. at 1303. This court held that

Plaintiff’s fraudulent importation claim was administratively exhausted and that Plaintiff failed

to plead the fraud allegations with sufficient particularity under USCIT Rule 9(b). Id. at 1304–

05. The court dismissed the First Amended Complaint and granted Plaintiff leave to cure the

pleading deficiencies discussed in the opinion. Id. at 1306. Plaintiff then filed the Second

Amended Complaint.

         In the Second Amended Complaint, Plaintiff includes new facts to support its allegations,

including that “Greenlight, under the direction of Aulakh . . . knowingly made material false

statements” as to the classification, valuation, and source fabrics of wearing apparel made “under

cover of approximately 148 entries” of athletic wearing apparel into the United States. Second



2
 Greenlight does not join in Aulakh’s Motion to Dismiss the Second Amended Complaint and is
not currently represented by counsel in this civil enforcement action. Notwithstanding
Greenlight’s failure to retain counsel to answer or otherwise respond to the Second Amended
Complaint, Aulakh urges the court to “dismiss or limit the case against Greenlight to the same
degree that relief is afforded to Mr. Aulakh.” Def. Br. at i n.1.
Court No. 17-00031                                                                               Page 3


Am. Compl. ¶ 6. As to the misclassification scheme, Plaintiff provides new facts identifying

Monika Gill (“Gill”) and Apramjeet “A.J.” Singh (“Singh”) as employees and agents of

Greenlight who knew that 122 entries of athletic wearing apparel were comprised of knitted

materials that are subject to higher duties, based on their role in selecting and sourcing the

fabrics used to produce the subject entries of wearing apparel. Id. ¶ 8. Plaintiff avers further that

Defendants, as well as Gill and Singh, conspired with Van Le, the owner of manufacturer One

Step Ahead, to make material and false statements about the composition of the athletic wearing

apparel. Id. ¶ 9. As to the undervaluation allegations, Plaintiff provides new facts to support its

allegation of a double-invoicing scheme. Id. ¶¶ 12–15. Plaintiff avers that “Aulakh directed

Greenlight to create and submit to [U.S. Customs and Border Protection] alternate invoices for

the same purchases of wearing apparel from One Step Ahead.” Id. ¶ 14. Plaintiff alleges that

Aulakh created a double-invoicing scheme, in which payments for the entered merchandise were

deposited into two separate bank accounts: monetary amounts matching amounts claimed in

documents submitted to U.S. Customs and Border Protection (“Customs”) were deposited into

the account of manufacturer One Step Ahead, and separate additional payments were deposited

into the personal account of Van Le, the owner of One Step Ahead. Id. ¶ 15, Ex. 2 (listing the

date and amount of payments relating to entries for which Aulakh and Greenlight created two

invoices).

   II.       LEGAL STANDARD

         “To survive a motion to dismiss, a complaint must contain sufficient factual matter,

accepted as true to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556

U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim

has facial plausibility when the plaintiff pleads factual content that allows the court to draw the

reasonable inference that the defendant is liable for the misconduct alleged.” Id. “The
Court No. 17-00031                                                                            Page 4


plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer

possibility that a defendant has acted unlawfully.” Id.

          When pleading fraud, “the circumstances constituting fraud” must be stated “with

particularity,” but intent or knowledge may be alleged generally. USCIT R. 9(b); Exergen Corp.

v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1326 (Fed. Cir. 2009). The plaintiff must inject factual

precision or some measure of substantiation, i.e., pleading in detail “the who, what, when, where,

and how of the alleged fraud.” Exergen Corp., 575 F.3d at 1327 (citation omitted). Although

intent and knowledge may be pled with generality, the pleading must contain “sufficient

underlying facts from which a court may reasonably infer that a party acted with the requisite

state of mind.” Id.; see United States ex rel. Heath v. AT&T, Inc., 791 F.3d 112, 123–24 (D.C.

Cir. 2015).

   III.       DISCUSSION

          Aulakh moves to dismiss the Second Amended Complaint under USCIT Rule 12(b)(6)

based on three theories. First, Aulakh argues that Plaintiff’s claims have not been exhausted

because Customs failed to provide proper notice to Defendants of the entries at issue when

conducting the underlying administrative penalty proceeding and thus failed to perfect the

penalty claim. Def. Br. at 17–24. Second, Aulakh asserts that the five-year statute of limitations

bars Plaintiff’s claims as to all entries identified in the Second Amended Complaint. Id. at 25–

31. Third, Aulakh argues that the Second Amended Complaint fails to plead the allegations of

fraud with sufficient particularity per USCIT Rule 9(b). Id. at 7–16.

          A. Exhaustion of Administrative Remedies

          Aulakh argues that Customs did not exhaust its administrative remedies because Customs

never provided Defendants with an appraisement schedule and failed to provide Defendants with

an opportunity to challenge the fraud allegations during the administrative proceedings. Id. at
Court No. 17-00031                                                                           Page 5


17–24. Plaintiff counters that Aulakh’s exhaustion argument “fails for the same reason it failed

earlier: because it is predicated upon the false characterization that Aulakh was not supplied with

the basis for [Customs’] penalty and loss-of-revenue calculation and was not provided an

adequate administrative hearing.” Pl. Opp’n at 19.

       This court previously considered and rejected Defendant Aulakh’s exhaustion argument,

holding that Aulakh received notice that Customs intended to assert liability against him for

penalties owed by Greenlight, and that Aulakh was given notice and a right to be heard

throughout the underlying administrative proceedings. Greenlight II, 419 F. Supp. 3d at 1304.

Defendant Aulakh presses the argument again here, based on his repeated claim that Defendants

never received an adequate appraisement schedule of the subject merchandise from Customs.

See Def. Br. at 23–24.

       The court remains unconvinced. To perfect a penalty claim at the administrative level,

Customs must issue pre-penalty and penalty notices containing certain information regarding the

particulars of the fraud allegations. Greenlight II, 419 F. Supp. 3d at 1303. The court observes

that the Second Amended Complaint contains sufficient facts to defeat the motion to dismiss

based on a challenge to administrative exhaustion, because Plaintiff avers that Customs issued a

pre-penalty notice of $3,232,032 pursuant to 19 U.S.C. § 1592 on or about April 15, 2014,

alleging that Greenlight’s violations were the result of fraud, and a subsequent penalty notice for

$3,232,032 and duty demand for $217,968.22 pursuant to 19 U.S.C. § 1592 on or about May 16,

2014. Second Am. Compl. ¶¶ 23–28. These allegations are sufficient to state a claim for relief

that is plausible on its face showing that Defendants received sufficient notice that Customs

intended to assert liability and had the opportunity to be heard during the administrative

proceedings, thus satisfying the administrative exhaustion requirement. The court denies,
Court No. 17-00031                                                                               Page 6


therefore, the motion to dismiss the Second Amended Complaint on the basis of administrative

exhaustion.

        B. Statute of Limitations

        Aulakh argues that the five-year statute of limitations has expired, based on Aulakh’s

contention that Plaintiff appended new exhibits documenting the entries at issue for the first time

in the Second Amended Complaint and thus Plaintiff failed to identify the entries and claim

details when Plaintiff filed the original Complaint in February 2017. Def. Br. at 25–27; Compl.,

ECF No. 2. Plaintiff responds that the Government discovered Defendants’ fraudulent scheme in

February 2012, when Aulakh first produced to Customs records from Greenlight showing

evidence of a double-invoicing scheme. Pl. Opp’n at 22. Plaintiff also notes that Defendants

received the same list of entries at issue during the pre-penalty and penalty stage of the

underlying administrative proceeding. Id. at 21–22.

        Civil penalty enforcement actions under Section 1592 must be initiated “within 5 years

after the date of the alleged violation or, if such violation arises out of fraud, within 5 years after

the date of discovery of fraud[.]” 19 U.S.C. § 1621(1). Courts refer to the “date of discovery of

fraud” language as the “discovery rule” and have applied that rule to toll the statute of limitations

until the date the Government first learns of the fraud. Greenlight Organic, Inc. v. United States,

42 CIT ___, 352 F. Supp. 3d 1312, 1315 (2018) (citing, among other cases, United States v.

Spanish Foods, Inc., 24 CIT 1052, 1056, 118 F. Supp. 2d 1293, 1297 (2000)) (“Greenlight I”).

The relevant inquiry for a fraud statute of limitations analysis focuses on when the Government

first discovered the fraudulent activity.

        In Greenlight I, the court addressed at summary judgment Greenlight’s contention that

the five-year statute of limitations barred the Government from continuing this civil enforcement

action. 352 F. Supp. 3d at 1314–16. The court denied Greenlight summary judgment,
Court No. 17-00031                                                                             Page 7


concluding that there were genuine issues of material fact as to when and how the Government

first learned of Defendants’ alleged fraudulent conduct. Id. at 1315–16. The court noted the lack

of undisputed material facts showing when the Government had knowledge of Greenlight’s

intent to commit fraud and when the Government discovered Greenlight’s misclassification and

undervaluation of its entries. Id. The court also found genuine disputes of material fact as to

when the Government first learned of Defendants’ alleged fraud and double-invoicing scheme.

Id.

       In contrast to the summary judgment context, the court reviews a motion to dismiss a

complaint based on whether the complaint contains sufficient facts accepted as true to state a

claim for relief that is plausible on its face. Iqbal, 556 U.S. at 678. Plaintiff alleges that Aulakh

and Greenlight provided documents in February 2012 to the Government evidencing the double-

invoicing scheme, which supports Plaintiff’s contention that the Government first became aware

of Defendants’ fraudulent activities in February 2012 when Defendants provided these

documents showing discrepancies in payments and invoicing. Second Am. Compl. ¶¶ 30–31.

       The question before the court is whether the Second Amended Complaint should be

dismissed based on an expiration of the five-year statute of limitations. Because the court

observes that the Second Amended Complaint contains sufficient facts accepted as true to

establish on its face that the Government discovered the fraudulent activity in February 2012,

and the Complaint was filed within five years in February 2017, the court rejects Aulakh’s

statute of limitations argument. The court denies the motion to dismiss the Second Amended

Complaint on the basis of the statute of limitations.

       C. Whether the Second Amended Complaint Pleads Fraud with Particularity

       Aulakh argues that the Second Amended Complaint should be dismissed for failure to

plead fraud with sufficient particularity. See Def. Br. at 4–17. Aulakh maintains that the
Court No. 17-00031                                                                            Page 8


allegations lack the requisite particularity of a pleading under Rule 9(b) in that the Government

still fails to indicate “how defendant directed the alleged fraudulent activity and continues to

withhold entry information, and [loss-of-revenue] and domestic value calculations (i.e.,

appraisement schedules) for each entry for which a claim is being made.” Def. Br. at 4; see id. at

5–16. The Government counters that the newly pled allegations in the Second Amended

Complaint answer “the specific who, what, when, where, and how” of the fraudulent

classification and valuation scheme. Pl. Opp’n at 15 (quoting Exergen Corp., 575 F.3d at 1328).

       A Section 1592(a) claim must contain sufficient factual matter showing that a person

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

United States through making either a material and false statement, document, or act, or a

material omission. 19 U.S.C. § 1592(a)(1)(A)(i)–(ii); United States v. Inn Foods, Inc., 560 F.3d

1338, 1343 (Fed. Cir. 2009). When pleading fraud, “the circumstances constituting fraud” must

be stated “with particularity.” USCIT R. 9(b); Exergen Corp., 575 F.3d at 1326. The plaintiff

must inject factual precision or some measure of substantiation, i.e., pleading in detail “the who,

what, when, where, and how of the alleged fraud.” Exergen Corp., 575 F.3d at 1327 (citation

omitted).

       The Government’s Second Amended Complaint satisfies USCIT Rule 9(b). The newly

added facts in the Second Amended Complaint describe the particulars of the fraudulent

importation scheme. For example, the Government (1) described how the double invoicing and

payment scheme worked, as Defendants made separate payments to a vendor’s business and

personal accounts, Second Am. Compl. ¶ 15; (2) stated that Aulakh knew of the differential

invoice values submitted to Customs, id., Ex. 2.; and (3) identified with whom Aulakh worked to

commit the alleged fraud, id. ¶ 15. The Government also alleges new facts detailing Defendants’

fraudulent misclassification and undervaluation activities. For example, Plaintiff alleges that
Court No. 17-00031                                                                          Page 9


Aulakh and other Greenlight employees represented falsely that the entered merchandise was

made from woven material, when they knew that the material was actually made of knitted

material subject to higher tariff levels, id. ¶ 8; Aulakh and other Greenlight employees had an

agreement with Van Le of One Step Ahead to mislabel the first-run polyester merchandise as

recycled polyester, id. ¶ 9; Aulakh directed Greenlight to create double invoices for each entry,

id. ¶¶ 12–15; and Aulakh directed Greenlight to make payments into two separate bank accounts

to conceal the double invoicing scheme, id. ¶ 15. The Government’s Second Amended

Complaint provides sufficient factual precision to satisfy “the who, what, when, where, and

how” standard for particularity under Rule 9(b). Exergen Corp., 575 F.3d at 1327. The court

therefore denies the motion to dismiss the Second Amended Complaint for failure to plead fraud

with sufficient particularity.

    IV.      CONCLUSION

          For the foregoing reasons, the court denies Defendant Aulakh’s Motion to Dismiss the

Second Amended Complaint.



                                                                     /s/ Jennifer Choe-Groves
                                                                     Jennifer Choe-Groves, Judge

Dated:      July 14, 2020
          New York, New York
