FILED U.S. COURT OF AP P E A LS E LE V EN T HC IRC U IT DE CEM B ER 15, 2005 THOMAS K. KAH

N CLERK [ P UB L I S H] I N TH E U N I TED STA TES C O U R T O F A PPEA LS F O R T H E E L E V E N T H C IR C U IT

________________________ N o. 04- 13065

________________________ D. C. Do c k e tNo . 0 3 - 2 1 0 8 6 - CV- J EM U N I T E D S T A T E S O F A M E R I C A , P la in tif f - A p p e lle e , v ersu s R I G E L S H I P S A G E N C I E S , I N C ., D ef endant -C ross D e f e n d a n t, G R E A T A M E R I C A N I N S U R A N C E C O M P A N Y O F N E W Y O R K , f .k .a . A m e r ic a n N a tio n a l F ir e I n s u r a n c e C o m p a n y , D ef endant -C ross C la im a n t- A p p e lla n t.

________________________ A p p ealfr om th e U n i te d S tate s D i st ri ct C ou rt f o r t he So ut he r n D i s t r i c t o f Fl o r i da

_________________________ ( D e c e m b e r 15, 2005) B efo re B IR C H , C A R N E S a n d R O N E Y , C i rcu i t J u d g es.2

P E R C U R I A M: D ef endant -app el l ant , G re atA m er i ca n Insurance Co m pany of N ew Y ork (“ G A IC ”), fo rm erl y k n o w n as A m eri can N at i o n al F i re In su ran ce C o m p an y, appeal s a n o rderby the di stri ctcourtgrant i ng sum m ary j ud gm entt o p l ai nt i ffap p e lle e , U n ite d S ta te s C u s to m s a n d B o r d e rP r o te c tio n ( “C u s to m s ” ) , a s to its a tt e m ptt o c ol l e c ton a n i nt e rna t i ona l c a rr i e rbond pos t e d f orthe l a di ng a nd unl a di ng of

the ve s s e l s M /V S i gr i d a nd M /V S he r i da E xpr e s s . T hi s c a s e c onc e rns w he the rthe s ur e ty of

a n i nt e rna t i ona l c a rr i e rbond s houl d be l i abl e unde rthe bond c ontr a c tf

ora pe na l ty i m pos e d by the gove rnm e nta ga i ns ta s hi p’ s ow ne r , thr ough its a g e n t, th e p r in c ip a l o n th e b o n d . W e h a v e d e te r m in e d th a t G A I C , a s th e s u r e ty for the pri nci pal , R i gel S hi ps A genci es , Inc. (“ R i gel ”) , vo l un t ar i l y a ss um ed l i ab i l i ty u p t o th e f

a c e a m o u n to f

th e b o n d , a n d w e A F F I R M. I . B AC KG RO UN D I n M a y 1 9 9 8 , V e k to rT r a d in g S .A . o w n e d th e c a r g o v e s s e l, M /V S ig r id . R i ge l S hi ps A ge nc i e s ( “ R i ge l ” ) w a s V e kt or ’ s a ge nta nd the pr i nc i pa l on a $100, 000 i nt e rna t i ona l c a rr i e rbond tha tR i ge l pos t e d f orthe l a di ng a nd unl a di ng of the S i gr i d upon i t s e ntry i nt o M i a m i f r om H a i t i . G A I C w a s the s ur e ty f orR i ge l on tha tbond. I n J une 1998, G ol de n S hi ppi ng ow ne d the c a r go ve s s e l , M /V S he r i daCustoms For m 3171 is an application for , inter alia, entry, clea ranc e, ladingand 1 un ladingof

a ve sse l. 3 E xpr e s s . A s G ol de n S hi ppi ng’ s a ge nt , R i ge l pos t e d the s a m e bond a s f orthe S i g ri d fo r th e l ad i n g an d u n l ad i n g o f th e S h eri d a E x p ress. I n e a c h c a s e , R i ge l not i f i e d C us t om s , by w a y of f i l i ng a F or m 3171, tha tthe 1 s hi p i n que s t i on w oul d be a rr i vi ng i n M i a m i f r om H a i t i . W he n e a c h ve s s e l a rr i ve d, th e ma n i f

e s tp r o v i d e d t o Cu s t o ms s h o w e d th a tth e s h i p c a rr i e d n o c a r g o . Cu s t o ms of f i c i a l s i ns pe c t e d e a c h s hi p a nd f ound appr oxi m a t e l y 462. 5 pounds of c oc a i ne conceal ed w i thi n the S i gri d and approx i m at el y 102 . 4 p ou nd s of c ocai ne conceal ed w i th i n th e S h eri d a E x p ress. T he gove rnm e nti s s ue d a not i c e of c i vi l pe na l ty t o e a c h s hi pow ne r , i n c a r e of Ri g e l , th e i ra g e n t , s t a t i n g th a tV e k t o ra n d G o l d e n Sh i p p i n g h a d v i o l a t e d 1 9 U . S. C. §§ 1584, 1433, a nd 1436 i n r e l a t i on t o the pr of f e r e d m a ni f

e s t s f orthe S i gr i d a nd the S he r i da E xpr e s s r e s pe c t i ve l y . P ur s ua ntt o 19 U . S . C . § 1584( a ) ( 2) , the gove rnm e nta s s e s s e d a pe na l ty – $7, 400, 000 f orthe S i gr i d a nd $1, 638, 400 f orthe S h e r id a E x p r e s s – r e p r e s e n tin g $ 1 0 0 0 f o re a c h o u n c e o f

c o c a in e f

o u n d o n th e s h ip a n d n o t in c lu d e d in th e s h ip ’s m a n if e s t. B y l ett er s dat ed 21 June 19 98 and 1 0 A ug ust19 98 , V ekt or and R i gel a c know l e dge d r e c e i ptof the not i c e r e l a t e d t o the S i gr i d butr e que s t e d r e m i s s i on of th e p e n a lty . O n 2 2 J u ly2 0 0 0 , th e g o v e rn m e n t a g r e e d to m itig a te th e p e n a lty to4

$ 3 ,7 0 0 ,0 0 0 a n d d e m a n d e d p a y m e n t w ith in th ir ty d a y s . N o p a y m e n t w a s m a d e . C o n s e q u e n tly , o n 2 9 S e p te m b e r2 0 0 0 , th e g o v e rn m e n t s e n t n o tic e o f th e c iv il pe na l ty t o G A I C a nd de m a nde d pa y m e ntof $100, 000, the va l ue of

the i nt e rna t i ona l c a rr i e rbond. G A I C m a de no pa y m e nt . O n 30 A pr i l 2003, the gove rnm e ntf

i l e d s ui tpur s ua ntt o 19 U . S . C . § 1584 i n the S outhe rn D i s tr i c tof F lo r id a a g a in s t G A I C a n d R ig e l to r e c o v e rth e c iv il p e n a lty s e c u r e d b y th e b o n d . G A IC cr oss- cl ai m ed agai nstR i gel . S ub se qu ent l y, G A IC m ov ed for s um m ary ju d g m e n t. T h e g o v e rn m e n t a ls o m o v e d f o rs u m m a ry ju d g m e n t. S i m i l ar l y, on 12 A ug ust19 98 , R i gel ac kn ow l edged the as se ss m entof a p e n a l ty i n c o n n e c t i o n w i th th e Sh e r i d a Ex p r e s s a n d r e q u e s t e d r e mi s s i o n . Cu s t o ms m i t i ga t e d the pe na l ty i n tha tc a s e t o $819, 000 a nd de m a nde d pa y m e ntw i thi n 30 da y s . N o pa y m e ntw a s e ve rm a de , a nd the gove rnm e ntf i l e d s ui tt o c ol l e c tf

r om G A I C on the bond. A f t e rne a r l y a y e a rof

c onf us i on be tw e e n the tw o hi ghl y s i m i l a rr e c or ds , the d is tr ic t c o u r t c o n s o lid a te d th e tw o c a s e s . T h e c o u r t g r a n te d s u m m a ry ju d g m e n t in f a v o ro f th e g o v e rn m e n t a s to th e liab ility o f G A I C w ith r e s p e c t to th e c iv il p e n a lty a r is in g f r o m th e c o c a in e f

o u n d o n th e S ig r id . T h e c o u r t d ir e c te d th e p a r tie s to pr oc e e d a s t o the m a tt e rof the S he r i da E xpr e s s i ns of a ra s i tm i ghti nvol ve ne w or di f f e r e ntl e ga l i s s ue s f

r om the othe rc a s e . T he gove rnm e ntf i l e d a m ot i on f

orGAI C also argues that, despite the ex istence of two violations, itcan only be liable f

or a 2 tot al of $1 00 ,0 00 – th efac eamou nt o f t hebo nd – b e c a us ebo th inc identsoc c ur

re d in thesame 5 s um m a ry j udgm e nt , a nd G A I C f i l e d a m ot i on f

orpa r t i a l s um m a ry j udgm e nt agai nstR i gel . T he di stri ctcourtgrant ed the go vernm ent ’ s m ot i on for s um m ary j ud gm entas t o the S heri da E xp re ss and G A IC ’ s m ot i on for part i al sum m ary j ud gm entagai nstR i gel . G A IC has t i m el y app ea l ed the grantof sum m ary ju d g m e n t in f

a v o ro f th e g o v e rn m e n t. O n app ea l , G A IC ar gu es thatthe di stri ctcourterre d i n g ra nt i ng sum m ary j udgm e nti n f

a vorof the gove rnm e nti n tha t : ( 1) G A I C i s notl i abl e f orthe m is c o n d u c t o f

th e v e s s e ls ’ m a s te r s o ro w n e r s b e c a u s e th e irc o n d u c t w a s n o t w ith in the cont em pl at i on of the sure ty a tthe form at i on of the bo nd contra ct ; (2) s t atut ory a uthor i ty f

orthe bond r e qui r e m e nti s f a ul ty i n tha t19 U . S . C . § 1623 doe s not autho ri ze C ust om s t o d em and a bo nd fr om i nt ernat i on al ca rr i er s thatgu ar ant ee s pa y m e ntof

pe na l t i e s f

orvi ol a t i on of

19 U . S . C . § 1584( a ) ( 2) , a nd s uc h a r e qui r e m e ntw oul d be c ontr a ry t o the N on- D e l e ga t i on D oc tr i ne a nd t o the D ue P roce ss and E qu al P rot ec t i on C l ause s; (3) there i s agenu i ne i ss ue of m at er i al fa ct a s t o w he the rR i ge l di s c l a i m e d l i abi l i ty f orpe na l t i e s w he n i tobl i ga t e d i t s bond w i th r e ga r d t o the l a di ng a nd unl a di ng of the S i gr i d; a nd ( 4) the ow ne r s a nd m a s te r s w e r e in d is p e n s ab le p a r tie s p u r s u a n t to F e d . R . C iv . P . 1 9 a n d th e s u its s houl d ha ve be e n di s m i s s e d be c a us e thos e pa r t i e s w e r e notj oi ne d. 2year . Appellant’s B r. at 49-50. The g overnment, corre ctly , conce des this point. Appellee’s B r.

at 32. Citations are to current ver sions of the United States Code and theCode of F ederal

3 Regulations unless the provisions cited were substantively amende d subsequent to the springand summer of 1998, in which c ase theversion cited is indicated. 6 I I . DI S CUS S I ON A . S t andard of R evi ew and G ov erni ng L aw

“ W e r e v i e w a g r a n to f

s u mma ry j u d g me n td e n o v o , ap p l y i n g th e s a me s t a nda r d a s the di s tr i c tc our t . ” K or m a n v. H B C F l a . , I nc . , 182 F . 3d 1291, 1293 ( 1 1 th C ir . 1 9 9 9 ) . W e d r a w a ll in f e r e n c e s in f

a v o ro f th e n o n - m o v in g p a r ty . I d .

“ W e w i l l af

fi rm a gra ntof sum m ary j ud gm enton l y i f no g enui ne i ss ues of m at er i al fa ctexi stand o nl y i f the m ov i ng party i s e nt i t l ed t o j ud gm entas a m att erof l aw . ” M ir a n d a v . B & B C a s h G r o c e ry S to r e , I n c ., 9 7 5 F .2 d 1 5 1 8 , 1 5 3 2 ( 1 1 th C ir . 1 9 9 2 ) . C ust om s s t atut es and regul at i on s r equi re that , w i thi n forty- ei gh tho urs “ af t er the a rr i va l a ta ny por torpl a c e i n the U ni t e d S t a t e s of . . . a ny ve s s e l f

r om a f or e i gn p o rto r p l ace, . . . th e m ast er o f th e v essel sh al l . . . m ak e fo rm al en try atth e n earest cust om s f

ac i l i ty. ” 19 U . S . C . § 1 43 4(a) (1); 19 C . F . R . § 4 . 3 (19 98 ). S uch a vess el 3 m u s t a ls o h a v e a m a n if

e s t. 1 9 U .S .C . § 1 4 3 1 ( a ) . T h a t m a n if e s t m u s t a c c u r a te ly r e f l e c t“ i nw a r d f

or e i gn c a r go on boa r d r e ga r dl e s s of the por tof

di s c ha r ge . ” 19 C .F .R . § 4 .7 a ( c ) ( 1 ) ( 1 9 9 8 ) ; s e e a ls o 1 9 C .F .R . § 4 .7 ( a ) ( 1 9 9 8 ) . A n in a c c u r a te7

m a ni f e s tm a y r e s ul ti n c i vi l pe na l t i e s c ha r ge d a ga i ns tthe m a s t e r , ow ne r , orpe r s on i n charge of the vess el . 19 U . S . C . § 1 58 4(a) (1). U nde r19 U . S . C . § 1623( a ) the S e c r e t a ry of the T r e a s ury m a y i m pos e a bond r e qui r e m e nt“ t o a s s ur e c om pl i a nc e w i th a ny pr ovi s i on of l a w , r e gul a t i on, or i ns truc t i on w hi c h the S e c r e t a ry of the T r e a s ury orthe C us t om s S e r vi c e m a y be a uthor i z e d t o e nf

or c e . ” T he S e c r e t a ry m a y i m pos e s uc h a r e qui r e m e nte i the rby r e g u la tio n o rb y s p e c if

ic in s tru c tio n “[ i]n a n y c a s e in w h ic h b o n d o ro th e rs e c u r ity is n o t s p e c if

ic a lly r e q u ir e d b y la w .” I d . F u r th e r , th e s ta tu te p e r m its C u s to m s to r e q u ir e a b o n d a s s e c u r ity f o rth e p a y m e n t o f

a n y “p e n a l s u m .” 1 9 U .S .C . § 16 23 (b)( 1). In th i s case, th e S ecret ary h as req u i red , b y reg u l at i o n , th at“ n o p assen g ers, ca rgo, bagg age, or other a rt i cl e s hal l be un l aden from a ves se l w hi ch arri ves di r e c t l y ori ndi r e c t l y f

r om a ny por torpl a c e out s i de the C us t om s t e rr i t ory of the U . S . , . . . u n t i l th e p o rtd i rect o r sh al l h av e i ssu ed a p erm i to r sp eci al l i cen se there fore on C ust om s F orm 31 71 . ” 19 C . F . R . § 4 . 30 (a ) ( 19 98 ). F urther, no such pe r m i ts ha l l be i s s ue d unl e s s “ the r e qui r e d c a s h de pos i torbond ha s be e n f i l e d on C u s to m s F o r m 3 0 1 , c o n ta in in g th e b o n d c o n d itio n s s e t f o r th in § 1 1 3 .6 4 o f

th is c hapt e rr e l a t i ng t o i nt e rna t i ona l c a rr i e r s . ” 19 C . F . R . § 4. 30( c ) ( 1998) . A m ong othe rthi ngs , tha tr e f

e r e nc e d r e gul a t i on r e qui r e s tha t“ [ i ] f a ny ve s s e l . . . ora ny8

m a s t e r , ow ne r , orpe r s on i n c ha r ge of a ve s s e l . . . i nc ur s a pe na l ty , duty , t a x, or o th er ch arg e p ro v i d ed b y l aw o r reg u l at i o n , th e o b l i g o rs (p ri n ci p al an d su rety, j o i n t l y a n d s e v e r a l l y ) a g r e e t o p a y th e s u m u p o n d e ma n d b y Cu s t o ms . ” 1 9 C. F. R. § 113. 64( a ) ( 1998) . F i na l l y , a s ur e ty on a C us t om s bond ow e s a n obl i ga t i on pr i m a r i l y t o the U ni t e d S t a t e s gove rnm e nt , nott o the pr i nc i pa l , ort o a ny pe r s on or othe re nt i ty on be ha l f

of w hi c h the pr i nc i pa l obl i ga t e s the bond. U ni t e d S t a t e s v. E . C . M cA fe e C o. , 19 C t . Int ’ l T ra de 12 43 , 12 44 , 90 1 F . S up p. 36 7, 36 9 (19 95 ). B . C ontr a c tua l S c ope of C ove r a ge G A I C ’s f

ir s t a r g u m e n t, th a t it d id n o t c o n te m p la te th e r is k s a s s o c ia te d w ith gu ar ant ee i ng the paym entof penal t i es thatm i gh tbe as se ss ed agai nstanyone other tha n R i ge l , l a c ks m e r i t . I n the c a s e of the S i gr i d, R i ge l c om pl e t e d F or m 3171 on behal f of the shi p’ s ow ner, L ekt or. In the ca se of the S heri da E xp re ss , R i gel com pl et ed F orm 31 71 on behal f of the shi p’ s ow ner, G ol den S hi pp i ng . N ei ther s hi p w oul d ha ve be e n a l l ow e d e ntry t o a ny U ni t e d S t a t e s portw i thoutF or m 3171, a nd ne i the rc oul d ha ve s uc c e s s f ul l y c om pl e t e d tha tf

or m w i thouts e c ur i ng the r e qui r e d bond. I n e a c h c a s e , the F or m 3171 r e f e r s t o a c ont i nuous bond i n the a m ountof

$100, 000 he l d by “ R i ge l S hi ps - A ge nc i e s , I nc ” w i th “ S ur e ty C om pa ny C ode 097. ” R 1( S i gr i d) - 1, E xh. A ; R 1( S he r i da E xpr e s s ) - 1 E xh. A . T he c o rr e s p o n d in g F o r m 3 0 1 h a s a n “X ” m a r k e d in th e b o x in d ic a tin g th a t th e b o n d inPrior to 11 September 2001, many car riers bor rowe d their ag ents’ bonds in this way . 4 B e c a us eno int e rn atio nal c arrier c ould u nlo a d w ith out a

bo nd , s maller s hipperstende d tog o to larg e r s hippingc omp anie s o r s hippingag e ntsto g e t a bo nd to u sefo r t

hemse lve s. Th e seag e nts , to help g arner business for themselves, agree d to obligatetheir bonds in favor of smaller shippers. The ag ents would then apply for permission on behalf of thesmaller shipper, to enter thepo rt , a

nd to l a deand

un ladec arg o. Cus tom s gra nte d entr y to t he sesh ipsin re lia

nc eon the se bo nd s. It madeno dif

ferenc eto C us tom s who ob lig ate d th ebo nd , a s longa s it would serv eto protec t government intere sts in enforcingcustoms laws and re gulations. Such a bond does not make e ither the princ ipal bond holder or thesurety criminally

responsible for

the coc aine, or other unmanife sted ca

rg o, it merely

puts them joint ly

and severally

at risk up to the face value of the bond for a

ny civil penalty

imposed in relation thereto. See Lumbermens Mut. Cas. Ins. Co. v. Darel Group U .S.A. Inc., 253 F . Supp. 2d 578, 580-81 (S.D.N.Y. 2003) ( involving a bond executed in 1999 in favor of a shipping -ag ent principal which, in turn, obligated it on behalf of a ship carr ying c oncealed coc aine upon which basis that ship was assesse d penalties for which the surety was then liable ). The Maritime Transportation Security Act of 2002, Pub. L . No. 107-295, 116 Stat. 2064 (codifie d in scattere d sections of Titles 14, 16, 33 and 46 of the United States Code), put a n end to this practice; e ach c arrier must now haveits own bond. At the time the incidents at issue took plac e , h ow e ver, ne ith e r t

heSigri d n or

theSheri da

Expre ss h a d a

bo nd of its own. Ne ith e r c ould enter any United States port without such a bond. Each wa s allowed to borrow the bond o b t ai n e d b y Ri g e lu

p o nwh i c hGA IC w a s th es ure ty. 9 que s t i on i s a n “ i nt e rna t i ona l c a rr i e r ” bond pur s ua ntt o § 113. 64. R 1( S i gr i d) - 1, E xh. B ; R 1( S he r i da E xpr e s s ) - 1 E xh. B . T hi s F or m 301 a l s o l i s t s R i ge l a s the p r in c ip a l a n d G A I C ( id e n tif ie d a ls o a s “S u r e ty N o . 0 9 7 ) ” a s th e s u r e ty . R 1 ( S ig r id ) - 1 , E x h . B ; R 1 ( S h e r id a E x p r e s s ) - 1 E x h . B . R e p r e s e n ta tiv e s o f b o th R i ge l a nd G A I C s i gne d the F or m 301 c r e a t i ng the unde r l y i ng bond. B y f i l i ng C ust om s F orm 31 71 on behal f of the S i gri d and the S heri da E xp re ss , R i gel v o l u n t ari l y o b l i g at ed th i s b o n d o n b eh al f o f th ese v essel s’ o w n ers. 4 T h e l an g u ag e o n th e face o f th e b o n d (F o rm 3 0 1 ), w h i ch G A IC si g n ed , al so cl ea rl y c on t em pl at es thatthe bo nd w i l l be “ ob l i gat ed” i n favor of thi rd part i es w he r e i tgi ve s s pa c e f

orthe pr i nc i pa l t o l i s te nt i t i e s pe r m i tt e d s o t o obl i ga t e the10

bo nd i n i t s nam e. S ee R 1(S i gri d)-1, E xh . B at“ S ec t i on II I” ; R 1(S heri da E xp re ss )- 1 E x h . B a t “S e c tio n I I I .” F u r th e r , b e c a u s e R ig e l o w n s n o v e s s e ls o f its o w n , it s houl d ha ve be e n c l e a rt o G A I C , tha tG A I C w a s a s s um i ng r i s k r e ga r di ng the act i o n s o f th i rd p art i es. I n s um , the r e gul a t ory s c he m e de f i ne s the r i s k a s s um e d by the s ur e ty . T he bo x checked on F orm 30 1 i n thi s c as e s peci fi ca l l y i nd i ca t es thatR i gel and G A IC w er e post i ng an i nt ernat i on al ca rr i erbo nd pu rs uantt o 1 9 C . F . R . § 1 13 . 64 . S ee R 1(S i gri d)-1, E xh . B at“ S ec t i on II , ” box 3; R 1(S heri da E xp re ss )- 1 E xh . B at

“ S ec t i on II , ” box 3. T he re fe re nced regul at i on spec i fi es thatthe bo nd covers p e n a ltie s o ro th e rc h a r g e s a s s e s s e d a g a in s t th e v e s s e l, m a s te r , o w n e ro rp e r s o n in char ge of the vess el . 19 C . F . R . § 1 13 . 64 (a ). In si gn i ng F orm 30 1, G A IC v o lu n ta r ily a g r e e d to p r o v id e a b o n d c o v e r in g th e a c tiv itie s o f th o s e th ir d p a r tie s . A n y o th e rin te rp r e ta tio n w o u ld le a v e G A I C w ith o u t a n y r e a l e x p o s u r e to liab ility and the tra nsac t i on w ou l d m ake no sense . C . S t a tut ory A uthor i ty f orB ond R e qui r e m e nt 1. I nt e rpr e t a t i on G A IC nextm akes three ar gu m ent s c hal l engi ng the st atut ory autho ri ty f or a C us t om s bond r e qui r e m e nti n the s e c i r c um s t a nc e s . F i r s t , G A I C c ont e nds tha t19 U . S . C . § 1584( a ) ( 2) , the s t a tut e unde rw hi c h the pe na l ty w a s a s s e s s e d, doe s not11

cont em pl at e thatthe penal ty be pai d b y a n i nt ernat i on al ca rr i erbo nd bu tby an o u tb o u n d v es se l clear an ce b o n d . In an y q u es ti o n o f s tatu to ry in terp re tati o n , “ [w ]e do no tl oo k aton e w ord o r t erm i n i sol at i on , bu ti nst ea d w e l oo k t o the ent i re st atut ory c on t ext . ” U ni t ed S t at es v. D B B , Inc. , 18 0 F . 3d 12 77 , 12 81 (11th C i r. 1999) . T hr ough 19 U . S . C . § 1584, C ongr e s s i m pos e s pe na l t i e s f orf a l s e or i ncom pl et e m ani fe st s. T hi s s t atut e f urther provi des thatthe penal ty i m po se d w hen m er chandi se foun d n oti ncl ud ed on a m ani fe stconsi st s of c ocai ne or other c ontr ol l e d s ubs t a nc e s c ons t i tut e s a l i e n on the ve s s e l a nd tha tc l e a r a nc e of a ny v e s s e l to le a v e “m a y b e w ith h e ld u n til s u c h p e n a ltie s a r e p a id o ru n til a b o n d . . . is gi ven for the paym entthere of. ” 19 U . S . C . § 1 58 4(a) (2). T h e a r g u m e n t, th a t th is p r o v is io n f o ra n o u tb o u n d c le a r a n c e b o n d f o r e s ta lls the paym entof penal t i es by an i nt ernat i on al ca rr i erbo nd , l ac ks m er i t . If a c l e a r a nc e bond w e r e the onl y bond C us t om s c oul d r e qui r e w i th r e s pe c tt o pa y m e nt of a § 1584( a ) ( 2) pe na l ty , a nd C us t om s s e i z e d a drug- c a rry i ng ve s s e l the va l ue of w h ic h w a s in s u f

f ic ie n t to c o v e rth e p e n a lty im p o s e d , th e n th e v e s s e l o w n e rc o u ld si m pl y c ho ose nott o see k the re turn o f the vess el and avo i d p ay i ng a s ub st ant i al p o rtio n o f th at p en alty. B y r eq u irin g an in tern atio n al ca rr ier b o n d fo r a v es se l’ s l adi ng and u nl adi ng up on entry , and there by pl ac i ng l i abi l i ty on the ob l i go rs for a pe na l ty pr ovi de d by l a w , C us t om s a s s ur e s c om pl i a nc e w i th, a m ong othe rl a w s , 19GA I C al s o argu es th atth e u s e o f th e i nt ern at i o n al carri er b o n d t o s at i s fy a dru g5 traff ickingpenalty

under § 1584 ( a)( 2) is irrational be causethe bond amount is often less than the amount of the penalty . Customs has discretionary authority to determine theamount of the bond, provided it is not less than $100. 19 C.F.R. § 113.13(a). The exerc ise of discretionary a uth ority to s e t Rig e l’ s b on d at an amou nt l ow e r t ha n th epenalti e s in

thi s c a seonly

wo rke d to Rige l and GAI C’s benef

it. That exercise of disc retion may not stand in support of the argument that the bond was not intende d to cover the risk that a greater penalty might be imposed. 12 U . S . C . §§ 1431( a ) , 1433( d) a nd 1584, a nd gua r a nt e e s tha ta tl e a s tthe bond a m ount w ill b e p a id in th e e v e n t a p e n a lty is in c u rr e d . F u r th e r , th e la n g u a g e o f § 1 5 8 4 s ta te s o n ly th a t C u s to m s “m a y ” w ith h o ld c l e a r a nc e unt i l the pe na l ty i s pa i d ora bond i s gi ve n, i tdoe s notm a ke the bond m andat ory. 19 U . S . C . § 1 58 4(a) (2). T hu s, the re qu i re m entof an i nt ernat i on al c a rr i e rbond doe s notrun a f oul of the por t i on of

19 U . S . C . § 1623 author i z i ng the i m pos i t i on of

a bond r e qui r e m e ntonl y w he r e no bond i s othe rw i s e r e qui r e d by l aw . S ee 19 U . S . C . § 1 62 3(a) . C on si deri ng the ent i re re gu l at ory s chem e, i ti s c l ea r thatC ust om s i nt ended the i nt ernat i on al ca rr i erbo nd t o ensure pay m entof penal t i es i m po se d, am on g o ther thi ng s, for f ai l ure t o m ani fe stca rgo u nd er§ 1 58 4(a) (2). 5 2. N on- D e l e ga t i on D oc tr i ne G A IC nextar gu es thatthe i nt ernat i on al ca rr i erbo nd re qu i re m entfor e ntry offe nd s the N on -D el egat i on D octri ne. G A IC spec i fi ca l l y a ss ert s thatC ust om s has im p r o p e r ly c o n s tru e d 1 9 U .S .C . § 1 6 2 3 , a r g u in g th a t C o n g r e s s d id n o t in te n d to pe r m i tthe r e qui r e m e ntof a n i nt e rna t i ona l c a rr i e rbond t o s e c ur e pa y m e ntof13

prospect i ve penal t i es . T hi s a rgum entfa i l s bec ause § 1 62 3(b)(1) expres sl y s t at es thatC on gres s m ay re qu i re a bon d “ for the paym entof . . . a penal sum . ” T he r e f or e , C us t om s i s a uthor i z e d t o r e qui r e pos t i ng of a bond a nd t o c ol l e c ton thos e bonds w he n, a s i n thi s c a s e , the vi ol a t i on of a s t a tut e ha s gi ve n r i s e t o the im p o s itio n o f

a p e n a lty . F u rth er, C o n g ress h as sp eci fi ed th e p u rp o ses fo r w h i ch C u st o m s m ay i m p o se s u c h a r e q u ir e m e n t: “f

o rth e p r o te c tio n o f

th e r e v e n u e o rto a s s u r e c o m p lia n c e w ith a ny pr ovi s i ons of

l a w , r e gul a t i on, ori ns truc t i on w hi c h the S e c r e t a ry of the T r e a s u ry o rth e C u s to m s S e r v ic e m a y b e au th o r iz e d to e n f o r c e .” 1 9 U .S .C . § 1623( a ) . T he U ni t e d S t a t e s C our tof I nt e rna t i ona l T r a de ha s r e c ogni z e d tha t“ [ t ] he grantof autho ri ty f

or re qu i ri ng bo nd s a nd se tt i ng thei r a m ou nti s s trong l y s t at ed a nd c om pr e he ns i ve . ” H e r a S hi ppi ng, I nc . v. C a rne s , 10 C t . I nt ’ l T r a de 493, 496, 64 0 F . S up p 2 66 , 26 9 (19 86 ). A l tho ug h C on gres s c anno tdel egat e e ss ent i al le g is la tiv e f

u n c tio n s , th e S u p r e m e C o u r t h a s r e a f f ir m e d th a t: [T ] h e C o n st i tu t i o n h as n ev er b een reg ard ed as d en yi n g t o C o n g ress th e n e c e s s a ry r e s o u r c e s o f f le x ib ility a n d p r a c tic a lity , w h ic h w ill e nabl e i tt o pe r f

or m i t s f unc t i on i n l a y i ng dow n pol i c i e s a nd e s t abl i s hi ng s t a nda r ds , w hi l e l e a vi ng t o s e l e c t e d i ns trum e nt a l i t i e s the m a ki ng of

s ubor di na t e rul e s w i thi n pr e s c r i be d l i m i t s a nd the de t e r m i na t i on of

f a c t s t o w hi c h the pol i c y a s de c l a r e d by the L e g is la tu r e is to ap p ly .14

A . L . A . S c he c ht e rP oul try C orp. v. U ni t e d S t a t e s , 295 U . S . 495, 530, 55 S . C t . 837, 843 ( 1935) . B e c a us e C ongr e s s ha s pr e s c r i be d the ge ne r a l s t a nda r ds t o w hi c h the S e c r e ta ry m u s t a d h e r e a n d h a s c le a r ly d e te r m in e d th a t b o n d s m a y b e r e q u ir e d to e n f o r c e la w s a n d C u s to m s r e g u la tio n s , G A I C ’s n o n - d e le g a tio n a r g u m e n t is m eri t l ess. 3. D ue P r oc e s s a nd E qua l P r ot e c t i on F i na l l y , G A I C c ont e nds tha tthe bond r e qui r e m e ntof f e nds due pr oc e s s a nd equal prot ec t i on un der the C on st i tut i on because i tre sul t s i n d epri vat i on of l i fe , l i b erty o r p ro p erty w i th o u td u e p ro cess o f l aw an d b ecau se i td i scri m i n at es ag ai n st sm al l bu si ness es . A party r ai si ng a due process chal l enge i s r equi re d t o sho w that the c ha l l e nge d l e gi s l a t i on “ i s r a t i ona l l y r e l a t e d t o a l a w f ul gove rnm e ntpurpos e a nd i s notunl a w f

ul l y a rbi tr a ry ordi s c r i m i na t ory . ” U ni t e d S t a t e s v. P l um m e r , 221 F . 3d 1 2 9 8 , 1 3 0 8 - 0 9 ( 1 1 th C ir . 2 0 0 0 ) . W e h a v e e x p la in e d th a t th is “te s t is g e n e r a lly ea si l y m et ” by a ski ng “ i f a ny se tof fa ct s m ay be re as on abl y c on ce i ved t o j ust i fy [ the r e gul a t i on] . ” I d. a t1309. T hr ough 19 U . S . C . § 1623, C ongr e s s a uthor i z e s the S e c r e t a ry of the T r e a s ury t o us e bonds t o e ns ur e c om pl i a nc e w i th C us t om s l a w s pe r t a i ni ng t o the f l ow of goods i nt o the U ni t e d S t a t e s . T he S upr e m e C our tha s e xpl a i ne d the prop ri ety of a l l ow i ng the go vernm ent , un der c ert ai n ci rc um st ance s, t o p l ac e15

c ontr ol s on pr i va t e bus i ne s s e s t o pr ot e c tthe publ i c w e l f a r e . N e bbi a v. N e w Y or k, 291 U . S . 502, 521- 24, 537, 54 S . C t . 505, 509- 11, 516 ( 1934) ( pr i c e c ontr ol s on m ilk d id n o t v io la te d u e p r o c e s s w h e r e im p o s e d f o rp u b lic g o o d ) . G ov ernm entcontrol ov erthe fl ow of go od s, i ncl ud i ng the fl ow of i l l egal drugs , i nt o the c ountry i s vi t a l t o the publ i c w e l f a r e . I m pos i ng c i vi l pe na l t i e s f or fai l u re t o m an i fest , esp eci al l y o f i l l eg al d ru g s, an d req u i ri n g v essel o w n ers t o p o st b o n d s to e n s u r e s u c h p e n a ltie s a r e p a id is a r e a s o n ab le m e th o d o f a d d r e s s in g th is c o n c e rn . T h e r e q u ir e m e n t th a t a n in te rn a tio n a l c a rr ie rb o n d b e p o s te d u p o n e n try is ne i the ra rbi tr a ry norc apr i c i ous a nd i s r a t i ona l l y r e l a t e d t o s t e m m i ng the f l ow of ille g a l d ru g s in to U n ite d S ta te s p o r ts . F in a lly , th is b o n d r e q u ir e m e n t ap p lie s to a ll ve s s e l s a nd, thus , i s notdi s c r i m i na t ory . A c c or di ngl y , i tdoe s notof f e nd due p ro cess req u i rem en t s. W ith r e s p e c t to G A I C ’s e q u a l p r o te c tio n a r g u m e n t, th e b o n d r e q u ir e m e n t is i m pos e d on a l l ve s s e l ow ne r s w ho s hi p c a r go t o the U ni t e d S t a t e s , r e ga r dl e s s of the s i z e of the i rbus i ne s s orthe i rc ountry of or i gi n. A l though a bond of a tl e a s t$100 w i l l be re qu i re d, the ac tual am ou ntof the bo nd re qu i re d i n eac h cas e i s det erm i ned by, am on g o ther f

ac t ors, the val ue and n ature of the m er chandi se shi pp ed as w el l as by a ves se l ’ s pri or re cord i n m ee t i ng paym entob l i gat i on s. 19 C . F . R . § 1 13 . 13 (a ), ( b) ( 3) , ( 5) . T hus , a ve s s e l ow ne rm ovi ng a l e s s va l uabl e c a r go w oul d l i ke l y notbe16

re qu i re d t o p ostthe sa m e bon d am ou ntas a l ar ger busi ness re gu l ar l y m ov i ng very val uabl e c ar go . B ec ause al l vess el ow ners m ustful fi l l the bo nd re qu i re m ent , equal pr ot e c t i on pr i nc i pl e s a r e notvi ol a t e d. C . R i gel ’ s A l l eged D i sc l ai m eras t o P enal t i es G A I C ne xtc ha l l e nge s i t s l i abi l i ty unde rthe bond a gr e e m e ntby poi nt i ng t o a d is c la im e ra lle g e d ly s u b m itte d b y R ig e l a lo n g w ith th e r e s t o f th e e n try d o c u m e n ts . T h e d is tr ic t c o u r t f

o u n d in s u f

f ic ie n t e v id e n c e o f

a v a lid d is c la im e rto c o n s id e rth is a r gum e nt . R 1( S i gr i d/ C ons ol i da t e d) - 42 a t6, n. 2; I d. 26 a t7 n. 5. “ W e r e vi e w the di stri ctcourt ' s f

i nd i ng s of f

ac tfor c l ea r e rr or . . . . ” K ent ov v. S heetM et al W o r k e r s ' In t’l A s s 'n L o c a l 1 5 , A F L - C I O , 4 1 8 F .3 d 1 2 5 9 , 1 2 6 2 ( 1 1 th C ir . 2 0 0 5 ) .

“ C l ea r e rr or i s ahi gh l y def er ent i al st andard of revi ew . A s the S up re m e C ou rthas e x p la in e d , a f

in d in g is ‘c le a r ly e rr o n e o u s ’ w h e n a lth o u g h th e r e is e v id e n c e to s uppor ti t , the r e vi e w i ng c our ton the e nt i r e e vi de nc e i s l e f tw i th the de f

i ni t e a nd f i r m c onvi c t i on tha ta m i s t a ke ha s be e n c om m i tt e d. ” H ol t on v. C i ty of T hom a s vi l l e S c h. D i s t . , 425 F . 3d 1325, 1350- 51 ( 11th C i r . 2005) ( c i t a t i ons a nd qu ot at i on s om i tt ed). I n f i ndi ng no va l i d di s c l a i m e r , the c our tobs e r ve d tha tG A I C ha d “ not of f e r e d a ny e vi de nc e de m ons tr a t i ng tha tthe di s c l a i m e r[ w a s ] a uthe nt i c or otherw i se adm i ss i bl e. ” R 1(S i gri d/ C on sol i dat ed)- 42 at6, n. 2; Id. 26 at7 n . 5. E ven17

i f the di s c l a i m e rha d be e n i nc l ude d w he n R i ge l pr e s e nt e d the l a di ng a nd unl a di ng doc um e nt s , the c our tnot e d tha tthe r e w a s “ no e vi de nc e tha tC us t om s a c c e pt e d the d is c la im e r , a d o p te d it, o ro th e rw is e a g r e e d to it.” I d . 4 2 a t 6 , n .2 ; I d . 2 6 a t 7 n .5 . T he r e i s no i ndi c a t i on on the f a c e of F or m 301 of

a ny m odi f

i c a t i on of

the t e r m s of th e b o n d , w h ic h c le a r ly in c o rp o r a te s a ll c o n d itio n s s e t o u t in 1 9 C .F .R . § 1 1 3 .6 4 . F i nal l y, such a di sc l ai m erw ou l d ess ent i al l y negat e the pu rpose of the bo nd , w hi ch C ust om s r equi re d t o b e post ed i n thi s c as e. W e f i nd no error. G A IC ’ s a rgum entas to th e d is c la im e rm u s t f a il. E . R ul e 19 Joi nd er G A IC fi nal l y c on t ends thatsum m ary j ud gm entshou l d n othave been grant ed because the di stri ctcourtfa i l ed t o j oi n the vess el ow ners and m as t er s a s i ndi s pe ns abl e pa r t i e s i n the l a w s ui t . W e r e vi e w a di s tr i c tc our t ’ s de c i s i on r e ga r di ng i ndi s pe ns abi l i ty of pa r t i e s f orabus e of

di s c r e t i on. M a nn v. C i ty of A lb a n y , G a ., 8 8 3 F .2 d 9 9 9 , 1 0 0 3 ( 1 1 th C ir . 1 9 8 9 ) . “A d is tr ic t c o u r t ab u s e s its di s c r e t i on w he n, i n r e a c hi ng a de c i s i on, i tappl i e s a n i nc orr e c tl e ga l s t a nda r d, f ol l ow s i m pr ope rpr oc e dur e s i n m a ki ng the de t e r m i na t i on, orm a ke s f i ndi ngs of fa ctthatar e c l ea rl y e rr on eous. S . E . C . v. S m yth, 42 0 F . 3d 12 25 , 12 30 (11th C i r. 2 0 0 5 ) ( c ita tio n s a n d q u o ta tio n s o m itte d ) .This opinion was later a mended to conf

orm to an answer to a que stion – unrelated to the 6 point of law at issue here – that had been earlier certified to the SupremeCourt of Georg ia. See City of Mari e tta v. CSXTransp. , Inc ., 22 5 F .3 d 1 28 3 ( 11 th C ir . 2 00 0) . Thelaw re le va nt to this c a seis undist

ur be d b y theamendment. The re gulation does not requirethat Customs demand pa y ment from the ve ssel owner or 7 ma ster p ri or

to m akinga

demand on theprinc ipal and

surety . Cu sto ms did s o a ny wa y in t his case , and both vessel owners failed to pay the penalties. 18 F e de r a l R ul e of

C i vi l P r oc e dur e 19 “ pr ovi de s a tw o- s t e p t e s tf orde t e r m i ni ng w h e th e ra n a c tio n s h o u ld p r o c e e d ” in th e ab s e n c e o f a n o n - p a r ty . C ity o f

M a r ie tta v . C S X T r a n s p ., I n c ., 1 9 6 F .3 d 1 3 0 0 , 1 3 0 5 ( 1 1 th C ir . 1 9 9 9 ) . “T h e f ir s t q u e s tio n is 6 w he the rc om pl e t e r e l i e f c a n be a f

f or de d i n the pr e s e ntpr oc e dur a l pos tur e , or w hether the no np arty' s absence w i l l i m pede ei ther the no np arty' s prot ec t i on of an i nt e r e s ta ts t a ke ors ubj e c tpa r t i e s t o a r i s k of i nc ons i s t e ntobl i ga t i ons . ” I d. I f the a n s w e rto th is f

ir s t q u e s tio n is “n o ,” w e d o n o t r e a c h p a r t tw o . I d . I n thi s c a s e , a s the di s tr i c tc our tappa r e nt l y r e c ogni z e d, c om pl e t e r e l i e f by r e c o v e ry u n d e rth e b o n d c a n b e h a d w ith o u t jo in in g th e o w n e r s o rm a s te r s . C u s to m s f

ile d a n a c tio n a g a in s t G A I C f o rc o lle c tio n o f

th e a m o u n t d u e p u r s u a n t to c o n tr a c t , th e i n t e rn a t i o n a l c a rr i e rb o n d . A l l th a ti s r e q u i r e d f o rG A I C t o b e c o me l i abl e unde rthe bond i s ( 1) the ve s s e l ow ne r ’ s br e a c h of 19 U . S . C . § 1584; ( 2) the a s s e s s m e ntof

a pe na l ty ; a nd ( 3) the ow ne r ’ s f a i l ur e t o pa y tha tpe na l ty . S e e 19 C . F . R . § 1 13 . 64 . A s aprac t i ca l m att er , fa i l i ng t o j oi n the ow ners or m as t er s does 7 n o t im p e d e G A I C ’s ab ility to p r o te c t its in te r e s ts o rle a v e it o p e n to m u ltip le19

liab ility . G A I C is f

r e e to p u r s u e in d e m n ity f r o m R ig e l a n d h a s d o n e s o . A c c or di ngl y , the a ns w e rt o the f i r s tque s t i on s houl d ha ve be e n a nd w a s “ no, ” a nd w e do notr e a c h s t e p tw o. T he r e w a s no abus e of di s c r e t i on a nd G A I C ’ s R ul e 19 a r gum e nti s una va i l i ng. I I I . CONCL US I ON G A I C ’ s appe a l of

the di s tr i c tc our t ’ s gr a ntof s um m a ry j udgm e nti n f a vorof the go vernm entas t o i t s a tt em ptt o col l ec ton an i nt ernat i on al ca rr i erbo nd po st ed w i th C u st o m s fo r th e l ad i n g an d u n l ad i n g o f th e S i g ri d an d th e S h eri d a E x p ress l a c ks m e r i t . G A I C w a s pa i d a pr e m i um f orpr ovi di ng c ove r a ge of thi s bond, a nd b e c a u s e R ig e l h a s n o s h ip s o f its o w n , th e o n ly w a y G A I C c o u ld h a v e e x p o s u r e to l i abi l i ty w ou l d b e throu gh the ac t i on s of thi rd part i es . T he penal ty i m po se d pur s ua ntt o 19 U . S . C . § 1584 i s e xa c t l y the ki nd of pe na l ty the r e gul a t i on de f i ni ng the cond i t i on s of the i nt ernat i on al ca rr i erbo nd w as i nt ended t o cov er . G A IC v o lu n ta r ily a s s u m e d th e r is k f o rth is p e n a lty . T h e r e w a s n o v a lid d is c la im e ra n d a ll i nd i spensabl e part i es part i ci pat ed i n the l aw sui t . A cc ordi ng l y, w e AF F I RM the o r d e ro f th e d is tr ic t c o u r t g r a n tin g s u m m a ry ju d g m e n t in f a v o ro f th e g o v e rn m e n t, c onf i r m i ng G A I C ’ s l i abi l i ty t o the e xt e ntof the $100, 000 f

a c e a m ountof

the in te rn a tio n a l c a rr ie rb o n d . AF F I RME D.