1

UNITED STATES OF AMERICA, EX REL. SCOTT WINSLOW, Plaintiff,-against- PEPSICO, INC., PEPSICO

BEVERAGE NORTH AMERICA, PEPSICO INTERNATIONAL,INC., PEPSI-COLA SALES & DISTRIBUTION,

INC., VANDEGRIFT FORWARDING, INC.,Defendants.

05 Civ. 9274 (CLB)

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OFNEW YORK

2007 U.S. Dist. LEXIS 40024

May 30, 2007, Decided

May 31, 2007 Page, Filed

CORE TERMS: concentrate, customs, classification, beverage, preparation, imported, odoriferous, import, manufacture,

public disclosure, primary jurisdiction, non-alcoholic, classified, knowingly, shipment, importation, heading..., plant,

false statement, soda, alcoholic, qui tam, allegations of fraud, pleading requirements, certification, fraudulent,

importing, requisite, publicly, manufacturing

 COUNSEL: [*1] For United States of America, Ex Rel

Scott Winslow, Plaintiff: Mark Paul Carey, LEAD

ATTORNEY, Carey & Associates P.C., Southport, CT.

For PepsiCo, Inc., PepsiCo Beverage North America,

PepsiCo International, Inc., Pepsi-Cola Sales &

Distribution, Inc., Defendants: Jonathan H. Beemer,

Karen M. Asner, Todd A. Gluckman, LEAD

ATTORNEYS, White & Case LLP (NY), New York,

NY; George James Terwilliger, White & Case LLP,

(DC), Washington, DC.

For Vandegrift Forwarding, Inc., Defendant: Eva LopezParedes, Richard M. Zuckerman, LEAD ATTORNEYS,

Sonnenschein Nath & Rosenthal LLP (NY), New York,

NY.

JUDGES: Charles L. Brieant, U.S.D.J.

OPINION BY: Charles L. Brieant

 OPINION

Memorandum and Order

 Brieant, J.

 Before the Court is a motion by defendants PepsiCo,

Inc., PepsiCo Beverage North America, PepsiCo

International, Inc., and Pepsi-Cola Sales & Distribution,

Inc., (collectively "PepsiCo") n1 to dismiss the qui tam

Relator's complaint, pursuant to Federal Rules of Civil

Procedure 12(b)(1), 12(b)(6), and 9(b). (Doc.19).

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n1 Relator also named as defendants two

unincorporated management divisions of PepsiCo,

Inc.: PepsiCo Beverage North America, which is no

longer a management division of PepsiCo, Inc., and

PepsiCo International. As is stated below, the

PepsiCo defendants are the only defendants

remaining in this action.

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 [*2] Relator Scott Winslow (the Relator) brought this

reverse qui tam action on November 1, 2005 pursuant to

the False Claims Act, 31 U.S.C. § 3729 et seq. ("FCA").

The Relator claims that PepsiCo knowingly and

fraudulently mis-classified soft drink concentrate that it

imported from the Republic of Ireland, in order to avoid

United States import duties.

 PepsiCo classified its substance under customs

classification HTS 3302.10.1000, which is entitled

"Mixtures of Odoriferous Substances used in the

Manufacture of Non-Alcoholic Beverages." Imports

under a § 3302 classification are not subject to any

customs duties. The Relator claims that the concentrate

properly should have been classified under HTS §

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2106.90.99, entitled "preparations for the manufacture of

beverages." Imports under this classification are subject

to an ad valorem duty of 6.4%. The Relator's Amended

Complaint alleges that PepsiCo knew that the proper

classification should have been under § 2106.90. The

Amended Complaint claims that, in knowingly misclassifying the imported concentrate, PepsiCo violated

the "reverse false claim" provision of the FCA, which

imposes liability on "any[*3] person" who "knowingly

makes, uses, or causes to be made or used a false record

or statement to conceal, avoid or decrease an obligation

to pay... to the Government." 31 U.S.C. § 3729(a)(7).

 The facts below are taken from Relator's Amended

Complaint, unless otherwise specified, and are assumed

to be true for the purposes of this motion only.

 All goods imported into the United States are taxed

according to the Harmonized Tariff Schedule of the

United States ("HTS"). The system includes more than

10,000 possible legal classifications. United States

Customs and Border Protection (CBP), the agency

responsible for interpreting the HTS, states on its website

that the HTS "provides duty rates for virtually every item

that exists. Experts spend years learning how to properly

classify an item in order to determine its correct duty

rate." http://customs.

gov/xp/cgov/import/duty_rates/determining.xml.

 As the Government explained in its Statement of

Interest submitted in this case, "CBP relies on importers

to supply accurate information about imported

merchandise-including the applicable HTS

classification." The importer is required to declare under

oath that, among[*4] other things, "all statements in the

invoice or other documents filed with the entry, or in the

entry itself, are true and correct." 19 U.S.C. §

1485(a)(3).

 The imported substance in this case is a "concentrate

product." In or about January 2003, PepsiCo began to

manufacture its soda concentrate at a new facility at

Cork, Ireland. This plant was, according to the

complaint, part of a large initiative by PepsiCo called

GCS:

"'GCS' stands for Global Concentrate Sourcing and

represented the largest capital expenditure ever made by

PepsiCo in the Ireland Concentrate Manufacturing Plant

to the tune of $150 million []. The PepsiCo Ireland

Manufacturing Plant in Cork, Ireland produces Pepsi,

Diet Pepsi, Pepsi Free and Mug Root Beer concentrate.

All other concentrate is produced in other manufacturing

plants located in the United States and worldwide." Am.

Compl. P 84.

 From January 2003 until March 2005, PepsiCo

imported and declared to Customs more than $1 billion

worth of concentrate. Relator alleges that imported

Concentrate is "sold to independent bottlers at a very

high cost (between $15M-$20M per 55 gallon drum) as

the.... formula for PepsiCo[*5] products." Am. Compl. P

66.

 Relator's Amended Complaint, while over seventy

pages long, does not convey an easily discernable

narrative of events and allegations. n2 Nevertheless,

Relator's allegations with regard to PepsiCo's concentrate

operations can be summarized as follows:

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n2 The Amended Complaint is littered with innuendo

and bizarre, irrelevant statements that appear to serve

no purpose other than to convey a former employee's

resentment. In describing a PepsiCo Senior VP,

Relator reports that "'Big Lou' was known for his

dapper dress and flashy cars." P 113. Relator makes

clear to the reader that he felt underappreciated: "The

entire GCS project was shoved down everybody's

throat, with a do or die attitude, that was born from

the top starting with the CFO Indra Nooyi who took

full credit for the project." P 167. "Although the

concentrate business was making billions and billions

of dollars, raises were unheard of in the concentrate

bullpen." P 168. "The women in the office had

control of the inventory and felt their jobs secure,

taking as many days off as they wished, calling in

sick when business was tough, and showing up late

when they felt like it." P 168.

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 [*6] Relator Mark Winslow is a former employee of

Defendant PepsiCo, Inc. He was hired by PepsiCo in

2002 to a position at its "Worldwide Concentrate

Headquarters" in Valhalla, N.Y. During the period from

July 2002 to mid-2004, when Winslow changed jobs

within PepsiCo, Winslow was one of the PepsiCo

employees responsible for PepsiCo's importation of its

concentrate from the Cork facility. Am. Compl. P 60.

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Winslow was terminated in early 2005 for alleged poor

performance. The Complaint describes PepsiCo's

concentrate operations as shrouded in secrecy, while at

the same time riddled with incompetence:

"Relator found that concentrate operations were isolated

from the rest of PepsiCo with its own policy and

procedures. Despite other colleagues mentioning

downsizing and cutbacks, Relator was told that

Concentrate was immune to ups and downs of other

areas of PepsiCo. The Concentrate executives appeared

to have unlimited spending accounts and used Research

and Development warehouse to store personal items and

even used the concentrate supply chain to delivery [sic]

wine to friends. There was a club like atmosphere on the

second floor of the concentrate operations building.

Doors to[*7] the Concentrate Boardroom and executive

offices were always kept shut, few people ever saw or

heard from the concentrate executives. When Relator

met with his managers in the first floor concentrate

operations office, they would usually ask him to close

the door behind him." P 131.

 Relator claims that he came to be aware of the alleged

concentrate importation fraud through a series of events.

When the decision to move production of all Pepsi

concentrate products to the Ireland plant was made,

Relator was told that there would be a lot of "grunt"

work to do, but that production in Ireland would secure

"massive production tax advantages and duty free

importation." P 117. Around this time, Relator alleges

that Michael Masucci, Relator's direct superior and at

that time the Transportation Manager, told him "Scott, in

concentrate operations we have the ability to shut down

PepsiCo." P 126.

 During the first weeks of November 2002, Relator was

informed that Vandegrift Forwarding Incorporated n3

had been selected as the customs broker for the

concentrate. P 132. Relator and Masucci were told to

prepare an "import manual" for their meeting with

Vandegrift President Mitch Scher. In that[*8] meeting,

held on December 11, 2002, Relator claims that Customs

classifications and import duties were discussed, and that

Scher made the following statements: "The repetitive

nature of this business is very helpful." "Please put

together an import and compliance manual." P 135.

"Listen guys Customs is like the IRS-they only look at

the top 1000." P139. "Do not rock the boat." P140. "Do

not draw attention." P 141. "Your delays will begin at the

FDA and then followed at Customs." P 142. "Scott you

realize that this is all dutiable including not only the

concentrate but the plant machinery, USA staff and Cork

staff involved in the process." P 147. "Your FDA coding

will be odiferous substance." P 150. "Your problem is

you can not [sic] prove you are paying a small office in

Ireland $30 million a week." P 153. "If you get a US

Customs audit you will need to show a transfer-debittransaction-bank draft." P 155. "You guys need to

understand CUSTOMS 101 SHOW PROOF OF

PAYMENT." P 157.

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n3 Vandegrift was originally named as a Defendant

in this action. By stipulation dated May 4, 2007,

Relator voluntarily dismissed all of his claims against

Vandegrift, including the conspiracy claim that he

had asserted against both PepsiCo and Vandegrift.

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 [*9] Relator alleges that Vandegrift "acted as PepsiCo's

attorney... filing FDA, Customs and relevant

documentation for the importation of concentrate."

Accordingly, Vandegrift stated on Customs Form 7501

that all of the prices, and all of the statements, contained

in the invoice were true.

 During a recall of a shipment of Diet Pepsi concentrate

due to quality control concerns, Relator claims that his

director, Mr. Molner, told him that the concentrate could

be "'easily mixed' with carbonated water to produce the

soda product sold to the U.S. Bottlers." P 187. Defendant

disputes this and asserts that further manufacturing steps

are necessary beyond the mere addition of water.

 2003 RFI

 On November 3, 2003, while employed at PepsiCo,

Relator received a formal Request for Information

("RFI") from Customs, requesting a sample of

concentrate from a shipment that was on hold in

Charleston, S.C. Relator passed this information on to his

manager Masucci. When Relator later asked Masucci

about the status of the matter, Masucci stated that the

PepsiCo executives "do not know what to do." Masucci

also allegedly stated: " Scott, you know that request is

really sending a shockwave through[*10] the PepsiCo

executive, I even hear Treasury and Tax are getting

involved in this... it is about time someone paid attention

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to what is going on in this business importing

concentrate." P 200. Masucci also told Relator that if he

was asked about concentrate imports by someone outside

of the company, to "play dumb" and reply, "I don't

know". P 203. Relator claims that the resolution of this

RFI was "suspicious", because, according to him,

PepsiCo never provided a sample to the government, but

instead performed its own testing. P P 199-200.

Customs Classifications at Issue in this Case

 Relator claims that PepsiCo knowingly and

fraudulently entered and imported its concentrate under

HTS subheading § 3302.10. The Explanatory Notes to

this section state that the "odoriferous substances"

covered by the section are "essential oils, resinoids,

extracted oleoresins and synthetic aromatics." The notes

further state that:

The heading also includes other preparations based on

odoriferous substances, of a kind used for the

manufacture of beverages. These preparations may be

either alcoholic or non-alcoholic and may be used to

produce either alcoholic or non-alcoholic

beverages.[*11] They must have a basis in one or more

odoriferous substances... which are used primarily to

impart a fragrance and secondarily to give a flavor to the

beverages. Such preparations generally contain a

relatively small quantity of odoriferous substances which

characterize a particular beverage; they may also contain

juices, colouring matter, acidulants, sweeteners, etc.,

provided that they retain their character of odoriferous

substances...

 The heading excludes compound alcoholic and nonalcoholic preparations of a kind used for the

manufacture of beverages, with a basis of substances

other than odoriferous substances described in Note 2 of

this Chapter (heading 21.06), unless they are more

specifically provided for elsewhere in the

Nomenclature). (emphasis in original).

 Relator argues that PepsiCo should have instead

classified its concentrate under § 2106, which is entitled

"Food preparations not elsewhere specified or included."

The explanatory notes to that chapter state that this

subsection includes:

Non-alcoholic or alcoholic preparations (not based on

odoriferous substances) of a kind used in the

manufacture of various non-alcoholic or alcoholic[*12]

beverages... The preparations contain (in whole or in

part) the flavouring ingredients which characterize a

particular beverage. As a result, the beverage in question

can usually be obtained simply by diluting the

preparation with water, wine or alcohol, with or without

the addition, for example, of sugar or carbon dioxide gas.

Some of these products are specially prepared for

domestic use; they are also widely used in industry in

order to avoid the unnecessary transport of large

quantities of water, alcohol, etc. As presented, these

preparations are not intended for consumption as

beverages and thus can be distinguished from the

beverages of Chapter 22...

 The heading excludes preparations of a kind used for

the manufacture of beverages, based on one or more

odoriferous substances (heading 33.02)" (emphasis in

original).

 The notes also state that § 2106 covers:

Preparations for the manufacture of lemonades or other

beverages, consisting, for example, of:

 ... syrup flavored with an added compound preparation

of this heading... containing, in particular, either cola

essence and citric acid, coloured with caramelised sugar,

or citric acid and essential[*13] acid.

 The Amended Complaint alleges that:

On information and belief, PepsiCo and Defendants

never used reasonable care in identifying the proper

classification for the importation of its soda concentrate

from Ireland. On further information and belief, PepsiCo

and Defendants knew they were intentionally using the

wrong HTS classification, but continued to do so because

it was highly profitable and the Customs Service would

not investigate their use of the HTS classification

3302.10.

Motion to Dismiss for Lack of Subject Matter

Jurisdiction

 PepsiCo moves to dismiss pursuant to Fed. R. Civ. P.

12(b)(1), arguing that the FCA specifically bars this

Court's subject matter jurisdiction. Specifically, PepsiCo

argues that § 3730(e)(4)(A) divests this Court of subject

matter jurisdiction over this case because Relator's FCA

claims are based on publicly disclosed information of

which Relator was not the original source. The relevant

part of the statute reads as follows:

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No court shall have jurisdiction over an action under this

section based upon the public disclosure of allegations or

transactions in a criminal, civil, [*14]or administrative

hearing, in a congressional, administrative, or

Government Accounting Office report, hearing, audit, or

investigation, or from the news media, unless the action

is brought by the Attorney General or the person

bringing the action is an original source of the

information. 31 U.S.C. § 3730(e)(4)(A). (emphasis

added).

 PepsiCo contends that the 2003 RFI sent to PepsiCo

was a "public disclosure", of the kind specifically

enumerated in that section of the FCA in that it was an

"administrative investigation." PepsiCo argues that "[i]t

is the RFI itself that disclosed the question as to the

proper classification of PepsiCo's concentrate to the

Relator." (Def.'s Reply Br. 3, n.4).

 The Court disagrees with PepsiCo's argument that the

2003 RFI sent by Customs constituted a "public

disclosure" that bars this Court's jurisdiction under the

FCA. The jurisdictional bar based on "public disclosure"

of allegations of fraud was added to the FCA by

Congressional Amendment in 1986. Our Court of

Appeals explained the purpose of the Amendment in a

decision written by Judge McLaughlin:

Because qui tam plaintiffs ("relators") are entitled

to[*15] a portion of the proceeds of successful suits,

there is the potential for parasitic lawsuits by those who

learn of the fraud through public channels and seek

remuneration although they contributed nothing to the

exposure of the fraud. To discourage such chicanery,

Congress carefully crafted a jurisdictional bar to qui tam

claims that are based on publicly disclosed information.

U.S. ex rel. Doe v. John Doe Corp., 960 F.2d 318, 319

(2d Cir. 1992).

 Our Court of Appeals reiterated in Doe its holding that

"allegations of fraud are publicly disclosed when they are

placed in the 'public domain.'" Id at 322 (internal

citations omitted). In that case, government investigators

"explained to the employees that they were investigating

allegations that John Doe Corp. was fraudulently

overcharging the government under defense contracts.

Several, but not all, employees questioned knew of the

overcharging by the defendant." Id at 320. The Court of

Appeals held that this constituted public disclosure,

because those employees who were innocent were

unaware of any fraud being perpetrated against the

government. ("Here... the allegations[*16] of fraud were

not just potentially accessible to strangers, they were

actually divulged to strangers to the fraud, namely the

innocent employees of John Doe Corp." Id at 322.

 PepsiCo is correct in its assertion that the RFI was

publicly disclosed.-i.e., that it was in the "public

domain." Where its argument fails is in regard to the

content of the "public disclosure." The 2003 RFI simply

requested PepsiCo to "provide a sample of the imported

merchandise ... along with the lab sample label enclosed

herewith to the US Customs Laboratory", and to "Submit

descriptive information, including component breakdown

with percentages by weight and CAS #'s (if available)."

It also stated that it was in regard to "Soda Concentrate"

imported from Ireland under an HTS subheading of

330210100. The 2003 RFI simply contained no

allegations or suggestions of fraud that were accessible

to the public. See Rockwell Intern. Corp. v. U.S., 127 S.

Ct. 1397, 1402, 167 L. Ed. 2d 190 (2007) (the parties

conceded that there was public disclosure when the

media reported toxic leakage of Defendant's concrete

blocks) U.S. v. New York Medical College, 252 F.3d 118,

120 (2d Cir. 2001) [*17](an audit by a public benefit

corporation specifically found that Defendant had

overcharged the corporation by over $2 million). The

mere request for a sample of the imported substance,

without more, is not sufficient to inform anybody of a

fraud being imposed on the United States.

 Because there was no public disclosure of the

allegations of fraud, the Court does not reach the issue of

whether or not the Relator was an "Original Source" of

such information, within the 1986 amendment.

Motion to Dismiss for Failure to State a Claim

 PepsiCo moves alternatively to dismiss Relator's

Amended Complaint pursuant to Fed. R. Civ. P. 12

(b)(6), arguing that 1) Relator has failed to plead a "false

statement", as is required by the FCA; and 2) Relator has

failed to meet the heightened pleading requirements of

Rule 9(b).

 The requirements of Rule 12(b)(6) in this Circuit are so

well known that no detailed citation is necessary. In

order to state a claim under the FCA for a "reverse false

claim", the Relator must allege (1) that the defendant

made, used, or caused to be used a record or statement to

conceal, avoid, or decrease an obligation to[*18] the

United States; (2) that the statement or record was false;

(3) that the defendant knew that the statement or record

was false; and (4) that the United States suffered

damages as a result." United States v. Raymond &

Whitcomb Co., 53 F. Supp. 2d 436, 444-445 (S.D.N.Y.

1999)(Motley, J.) (Internal citations omitted).

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 PepsiCo argues that the complaint should be dismissed

because Relator has not pled the requisite false statement

required by the FCA. PepsiCo argues that, "at best, [the

complaint] challenges the ultimate classification, which

is a legal interpretation based on a unique set of facts."

Def.'s Mem. in Supp. 11. PepsiCo further states that "[a]

disputed interpretation of a government regulation or

contract provision about which reasonable minds can

disagree cannot constitute a requisite false statement

because it is not an objective statement of fact." Id at 12.

 Liability under the FCA requires that Defendant "

knowingly makes, uses, or causes to be made or used, a

false record or statement to conceal, avoid, or decrease

an obligation to pay or transmit money or property to the

Government." 31 U.S.C. § 3729 (a)(7) (emphasis[*19]

added). Our Court of Appeals has noted that "the term

'false or fraudulent' is not defined in the Act." Mikes v.

Straus, 274 F.3d 687, 696 (2d Cir. 2001). However, the

Supreme Court has held that the Act is "intended to reach

all types of fraud, without qualification, that might result

in financial loss to the Government." United States v.

Neifert-White Co., 390 U.S. 228, 232, 88 S. Ct. 959, 19

L. Ed. 2d 1061 .

 PepsiCo certified, as it was required to do under the

statute, that the statements made to Customs were true.

19 U.S.C. § 1485(a). As the United States argues in its

Statement of Interest:

Pepsi's certification directly implied certain facts about

the nature of the substance it was importing... [B]y

certifying that its concentrates were properly classified

under [3302.10.1000], Pepsi thereby certified that the

concentrates were mixtures based upon odoriferous

substances. If Pepsi was in fact importing soda

concentrates that did not contain any odoriferous

substances, or of such substances did not form the basis

of the product, then Pepsi's certification would be 'false'".

(10).

 This Court agrees, and concludes that[*20] the

certification of the concentrate under 3302.10. if false, is

sufficient to constitute a "false statement" under the

FCA. n4

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n4 After the Government submitted its Statement of

Interest, PepsiCo appeared to have abandoned this

argument, both at oral argument and in its reply brief.

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 Pleading Requirements Under Rule 9(b)

 PepsiCo also argues that Relator's complaint fails to

meet the heightened pleading requirements of Fed. R.

Civ. P. 9(b). PepsiCo argues that the Amended

Complaint "is not founded upon factual allegations of

particularized false or misleading statements, but rather,

in a conclusory fashion, simply equates fraud with an

allegedly erroneous HTSUS classification, supporting

that conclusion with the allegation that it was "profitable

to do so." Def.'s Mem. in Supp. 15.

Federal Rule of Procedure 9(b) requires that "[i]n all

averments of fraud or mistake, the circumstances

constituting fraud or mistake shall be stated with

particularity." Our[*21] Court of Appeals has held that,

because "[i]t is self-evident that the FCA is an anti-fraud

statute," the heightened pleading requirements of Rule

9(b) apply. Gold v. Morrison-Knudsen Co., 68 F.3d

1475, 1476 (2d Cir. 1995). In order to meet this standard,

a complaint must "(1) specify the statements that the

plaintiff contends were fraudulent, (2) identify the

speaker, (3) state where and when the statements were

made, and (4) explain why the statements were

fraudulent." Mills v. Polar Molecular Corp., 12 F.3d

1170, 1175 (2d Cir. 1993).

 Relator has identified the alleged false statements, and

has identified when and where they were made.

Specifically, Relator alleges that PepsiCo's import entry

statements and records were false or fraudulent on each

date they were certified and submitted with respect to

various shipments at various points of entry. Relator has

attached a list of every shipment of concentrate that he

claims was incorrectly classified. In the list, Relator

details, among other things, the port of entry, the

declared value, and the date of arrival of each shipment.

These allegations are adequate to satisfy Rule 9(b).

 This Court also[*22] concludes that the Amended

Complaint adequately alleges the requisite intent

required by 9(b), and alleges facts sufficient to raise the

inference of fraud. Our Court of Appeals has held that

the "requisite intent [for liability under the FCA] is the

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knowing presentation of what is known to be false" as

opposed to negligence or innocent mistake." Mikes v.

Straus, 274 F.3d 687, 703 (2d Cir. 2001) (quoting

Hagood v. Sonoma County Water Agency, 81 F.3d 1465,

1478 (9th Cir.1996)). The FCA provides that:

For purposes of this section, the terms "knowing" and

"knowingly" mean that a person, with respect to

information--

 (1) has actual knowledge of the information;

 (2) acts in deliberate ignorance of the truth or falsity of

the information; or

 (3) acts in reckless disregard of the truth or falsity of

the information, and no proof of specific intent to

defraud is required.

31 U.S.C. § 3729 (b)

 Reading the Amended Complaint in the light most

favorable to Relator, as the Court must in a motion to

dismiss, it tells us that PepsiCo executives purposely

turned a blind eye towards the importation and

classification[*23] of their concentrate, when they had

reason to believe that the classification was incorrect.

This allegation is supported by the statements attributed

to Vandegrift President Mitch Scher, supra. If, as

alleged, PepsiCo management purposely stayed aloof

from the classification details, this could be evidence of

scienter.

 Less specific is Relator's allegation that PepsiCo did

not provide a true sample of the imported product to

Customs in response to the 2003 RFI. It is not fatal to the

complaint that Relator does not specify who exactly

made the certification on behalf of the company, or who

in PepsiCo, if anyone, provided the sample to Customs in

response to the RFI. As our Court of Appeals has held,

"[d]espite the generally rigid requirement that fraud be

pleaded with particularity, allegations may be based on

information and belief when facts are peculiarly within

the opposing party's knowledge." Wexner v. First

Manhattan Co. , 902 F.2d 169, 172 (2d Cir. 1990).

 Doctrine of Primary Jurisdiction

 PepsiCo argued in its initial brief in support of its

motion that, even if the Court finds that the Amended

Complaint satisfies the requirements of rules

[*24]12(b)(1) and 12(b)(6), that the Court should

dismiss this case as an exercise of its discretion under the

doctrine of Primary Jurisdiction. PepsiCo argued that

because Customs investigated the issue of the

classification of the concentrate twice, (in the RFI's of

2003 and 2006) and twice upheld PepsiCo's classification

of the imported substance, that the action should be

dismissed in deference to the expertise of Customs.

 As the United States argues in its Statement of Interest

submitted in this case, and as PepsiCo now seems to

recognize, the doctrine of primary jurisdiction simply

does not provide a basis by which this case can now be

dismissed. "The doctrine's central aim is to allocate

initial decisionmaking responsibility between courts and

agencies and to ensure that they 'do not work at crosspurposes.'" Ellis v. Tribune Television Co., 443 F.3d 71,

81 (2d Cir. 2006) (quoting Fulton Cogeneration Assocs.

v. Niagara Mohawk Power Corp., 84 F.3d 91, 97 (2d

Cir.1996) (emphasis added)). Application of the doctrine

is appropriate where " preliminary reference of issues to

the agency will promote that proper working relationship

between court[*25] and agency that the primary

jurisdiction doctrine seeks to facilitate." Ellis at 82

(emphasis added). This is such a case. If the product was

in fact correctly classified and properly entered under §

3302 as a "mixture of odoriferous substances used in the

manufacture of non-alcoholic beverages," all the lurid

allegations of the Amended Complaint fade into

insignificance. It seems to this Court, informed in part by

the necessity of reading and considering the so-called

"Murphy Letter," n5 that the substance is exactly what

PepsiCo claims it is, by the plain meaning of the

Harmonized Tariff Schedule, and was properly entered

under § 3302. If this is in fact is true, it does not matter

if, as Relator suggests, he and some of his associates

believed they were pulling a fast one on the Government.

This ultimate fact may not be adjudicated on a motion

addressed to the face of the complaint.

- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - -

- - -

n5 This Court has held at Defendant's request that the

Murphy Letter is the subject of attorney-client

privilege, although Relator is in physical possession

of a copy of it.

- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - -

- - - -

Case 1:07-cv-03314-GBD Document 58-2 Filed 02/29/2008 Page 7 of 8
8

 [*26] PepsiCo points out that "Customs has

investigated PepsiCo's classification not once, but twicefirst, at the end of 2003 after PepsiCo began importing

significant quantities of concentrate and once again, in

2006, after this action was filed under seal. In neither

such instance did Customs alter PepsiCo's proposed

classification under § 3302.10. On the contrary, in the

most recent compliance report forwarded by Customs to

PepsiCo, Customs expressly stated in its' remarks

column that 3302.10 was the correct classification. (Def.

Br. 21.) (emphasis in original)

 Of course this Court cannot infer that Customs acted

in 2006 because of knowledge of and in response to the

fact that this case was filed under seal on November 1,

2005. For all we know both considerations were normal,

routine inquiries, not informed by the existence of any

controversy. This Court is unable to say with confidence

that the rulings in 2003 and 2006, favorable to PepsiCo,

are any more than routine enforcement, uninformed by

Relator's dramatic tale of corporate intrigue.

 Fairness and practicality demand that CBC have an

opportunity to reassess the issue, informed by Relator's

allegations. Import transactions[*27] in the product are

continuing. It would border on the absurd for this Court

to adjudicate the proper classification, at the risk that

CBC thereafter could resolve the issue differently and be

affirmed in the Court of International Trade. For this

reason, and because adjudication requires special

expertise, abstention in favor of the Primary Jurisdiction

of CBC is indicated.

Conclusion

 For the foregoing reasons, Defendants' motion to

dismiss is denied. (Doc. 19). This Court defers in favor

of the United States Customs and Border Patrol Agency

under the Doctrine of Primary Jurisdiction for the

purpose of permitting the agency to exercise its specific

expertise in classification, to inspect and sample the next

shipment of the product into the United States and

determine whether it is properly classified. Defendant

shall serve and file copy of this Memorandum and Order

with the Agency, along with information as to the date

and location of the next intended entry of the product

into the United States.

 All proceedings in the action are stayed until further

order of the Court, for a reasonable time to permit the

agency to exercise its primary jurisdiction to determine

the proper customs[*28] classification.

 Counsel for Defendant shall serve and file promptly in

this action copies of all filings with the CBC in aid of its

exercise of primary jurisdiction, and copies of all

decisions, reports, orders, rulings or other documents

issued by the CBC in connection therewith. In order to

maintain docket control, a status report conference will

be held on December 14, 2007 at 9:15 A.M.

 SO ORDERED.

 Dated: White Plains, New York

 May 30, 2007

 Charles L. Brieant, U.S.D.J.

Case 1:07-cv-03314-GBD Document 58-2 Filed 02/29/2008 Page 8 of 8