Opinion ID: 624415
Heading Depth: 2
Heading Rank: 3

Heading: Claims Against the Government

Text: In light of our conclusion that the Court of International Trade lacks jurisdiction over the claims asserted against the Surety Defendants, all that remains for resolution are the claims raised on appeal that have been asserted against the Government (i.e., Counts 1, 2, 6, and 8-15). Of these claims, Counts 1, 2, and 6 must fail because Plaintiffs do not qualify as intended third-party beneficiaries. We explain why below in Subsection 1. Counts 8-15 fail for the reasons discussed below in Subsection 2.
As mentioned above, during the time period at issue in this lawsuit, a new shipper was permitted to satisfy its duty deposit requirement by posting a Customs bond equal in value to the cash deposit otherwise required. As part of this process, sureties entered into contracts with importers to insure payment of deposits. Plaintiffs target these bond contracts in Counts 1, 2, and 6, arguing that they have a right to enforce the contracts as third-party beneficiaries. The Court of International Trade found otherwise, dismissing Counts 1, 2, and 6 after concluding that Plaintiffs did not qualify as intended third-party beneficiaries. Sioux Honey, 700 F.Supp.2d at 1348. We agree with the Court of International Trade. A plaintiff lacking privity of contract can nonetheless sue for damages under that contract if it qualifies as an intended third-party beneficiary. See Flexfab, L.L.C. v. United States, 424 F.3d 1254, 1263 (Fed.Cir.2005); Alpine Cnty., Cal. v. United States, 417 F.3d 1366, 1368 (Fed.Cir.2005); Chancellor Manor v. United States, 331 F.3d 891, 901 (Fed.Cir.2003). In order to prove third party beneficiary status, a party must demonstrate that the contract not only reflects the express or implied intention to benefit the party, but that it reflects an intention to benefit the party directly.  Glass v. United States, 258 F.3d 1349, 1354 (Fed.Cir.2001) (emphasis added). The intent of the parties to the contract is therefore the cornerstone of a claim for third-party beneficiary status. Flexfab, 424 F.3d at 1259; see also Astra USA, Inc. v. Santa Clara Cnty., Cal., ___ U.S. ___, 131 S.Ct. 1342, 1347, 179 L.Ed.2d 457 (2011) (A nonparty becomes legally entitled to a benefit promised in a contract ... only if the contracting parties so intend.). A party does not obtain third-party beneficiary status, however, merely because the contract would benefit them. FDIC v. United States, 342 F.3d 1313, 1319 (Fed.Cir.2003). Indeed, third-party beneficiary status is an exceptional privilege and should not be granted liberally. German Alliance Ins. Co. v. Home Water Supply Co., 226 U.S. 220, 230, 33 S.Ct. 32, 57 L.Ed. 195 (1912); Flexfab, 424 F.3d at 1259. That said, [t]he intended beneficiary need not be specifically or individually identified in the contract. Montana v. United States, 124 F.3d 1269, 1273 (Fed. Cir.1997). If not identified, however, the nonparty must still fall within a class clearly intended to be benefited thereby. Id. When the intent to benefit the third party is not expressly stated in the contract, evidence thereof may be adduced. Roedler v. Dep't of Energy, 255 F.3d 1347, 1352 (Fed.Cir.2001). Under our precedent, Plaintiffs (i.e., domestic producers) cannot qualify as intended third-party beneficiaries of the new shipper bond contracts. First, the contract language itself clearly treats the Government as the sole beneficiary. In particular, the language states that the importers and sureties agreed to bind themselves to the United States in the amount or amounts, as set forth below. The contracts also incorporate federal regulations indicating that the Government is the beneficiary. See, e.g., 19 C.F.R. § 113.62 (requiring principal and surety, jointly and severally to [p]ay, as demanded by Customs, all additional duties, taxes, and charges subsequently found due... on any entry secured by [a] bond). Plaintiffs do not argue to the contrary, acknowledging that each new shipper bond is a contract among an importer (the bond's principal and primary obligor); the issuing surety (the bond's secondary obligor); and Customs (the bond's sole identified beneficiary). The contracts do not identify the domestic producers as beneficiaries, also a conclusion Plaintiffs do not dispute. The bond contracts' (1) treatment of the Government as a beneficiary; (2) failure to identify the domestic producers as beneficiaries; and (3) failure to mention a class of third parties that could potentially encompass the domestic producers, see Montana, 124 F.3d at 1273, all combine to strongly support the conclusion that these contracts do not reflect[] an intention to benefit the domestic producers directly. See Glass, 258 F.3d at 1354. Instead, any benefit the domestic producers may derive from the bond contracts would come indirectly through the application of the CDSOA. The mere fact that the domestic producers stand to ultimately benefit from the bond contracts in some capacity does not automatically render them intended third-party beneficiaries. See, e.g., FDIC, 342 F.3d at 1319. The intended benefit must be direct. See Glass, 258 F.3d at 1354. Plaintiffs argue on appeal that they are intended third-party beneficiaries because the new shipper bond contracts are essential to achieving the antidumping statute's purpose of collecting duties, which are then redistributed to domestic producers under the CDSOA. According to Plaintiffs, the importers, Surety Defendants, and the Government knew the contracts they were involved in would operate within the CDSOA framework and that the domestic producers would benefit directly from the contracts. See Montana, 124 F.3d at 1273 (The intended beneficiary need not be specifically or individually identified in the contract and can merely fall within a class clearly intended to be benefited thereby.). As a result, contend Plaintiffs, the intent of the contracting parties to directly benefit the domestic producers exists. In further support of its position, Plaintiffs rely on Roedler, 255 F.3d at 1352, which states that when a contract involving the United States implements a statutory enactment, it is appropriate to inquire into the governing statute and its purpose when performing the third-party beneficiary analysis. Following the Supreme Court's recent guidance in Astra, we reject Plaintiffs' contentions. In Astra, a program created by a federal statute imposed limits on prices that drug manufacturers could charge healthcare facilities for medications. 131 S.Ct. at 1345. Drug manufacturers wishing to participate in state Medicaid systems had to enroll in this federal program. Id. To enroll, the drug manufacturers signed form contracts with the Department of Health and Human Services (HHS) that simply incorporate[d] statutory obligations. Id. at 1348. One statutory provision in the federal program provided for compensation to healthcare facilities overcharged by the drug manufacturers. Id. at 1347. Some healthcare facilities, believing they were overcharged for drugs, sued drug manufacturers under this federal statutory scheme. Id. Specifically, the healthcare facilities alleged that the overcharging constituted a breach of the manufacturers' enrollment contracts and that the facilities, as third-party beneficiaries of those contracts, could recover damages. [4] Id. at 1347 Despite acknowledging that the enrollment contracts specifically named the healthcare facilities as recipients of the drugs and that the very purpose of these agreements was to ensure that these facilities were not overcharged, the Supreme Court declined to accord the plaintiffs intended third-party beneficiary status. Id. at 1347-48. Instead, the Court held that suits filed by the statutorily-protected healthcare facilities to enforce the enrollment contracts were incompatible with the statutory regime. Id. at 1345. In reaching this conclusion, the Court emphasized that Congress placed the Secretary of HHS in control of the drug pricing scheme, not the healthcare facilities. Id. [HHS's] control could not be maintained were potentially thousands of [healthcare facilities] permitted to bring suits alleging errors in manufacturers' price calculations. Id. If [the healthcare facilities] may not sue under the statute, it would make scant sense to allow them to sue on a form contract implementing the statute, setting out terms identical to those contained in the statute. Id. Indeed, the Court reasoned that [t]he absence of a private right to enforce ... would be rendered meaningless if [the healthcare facilities] could overcome that obstacle by suing... instead. Id. at 1348. Under Astra, the fact that a private entity stands to benefit financially from a statutory scheme does not necessarily make it an intended third-party beneficiary of contracts operating within that scheme where no statutory private right of action exists. The present case is factually similar to Astra. First, both cases involve complex statutory schemes that offer the plaintiffs the potential of obtaining a financial benefit. Moreover, like the plaintiffs in Astra, Plaintiffs in this case attempt to recover under a contract intertwined with that statutory scheme, claiming intended third-party beneficiary status. Additionally, the contracts at issue in both cases are governed by federal laws. Perhaps most importantly, the statutes governing the contracts at issue in both cases do not grant the plaintiffs the right to bring a private lawsuit to recover the fees allegedly owed to them. See id. at 1347. Indeed, in the present matter, Congress vested the Government with the authority to enforce the Customs bond contracts, not the domestic producers. See 19 U.S.C. § 1623(a)-(c) (authorizing the Secretary of the Treasury or the Customs Service to enforce Customs bonds); see also id. § 1514(a)-(b) (after Customs makes a payment demand on the surety, the surety must either pay Customs or file an administrative protest with Customs which, if denied, may be challenged in the Court of International Trade). In a situation such as this, where no statutory private right to enforce the Customs bonds exists, permitting a party to sue as an intended third-party beneficiary would improperly render [t]he absence of [that] private right ... meaningless. See Astra, 131 S.Ct. at 1348. In sum, while the bond contracts treat the Government as a direct beneficiary, the same cannot be said of the domestic producers or a class that encompasses the domestic producers. This conclusion is supported by the fact that the antidumping statutes do not confer private enforcement rights on the domestic producers under the bond contracts. Any benefit the domestic producers derive from the bond contracts comes indirectly as a result of the operation of the CDSOA. Because Plaintiffs are not intended third-party beneficiaries of the bond contracts, they cannot enforce these contracts. Thus, we affirm the Court of International Trade's dismissal of Counts 1, 2, and 6 as asserted against the Government.
After our rulings on the supplemental jurisdiction and third-party beneficiary matters, only Counts 8-15 remain at issue in this appeal. As mentioned, these claims, which primarily accuse Commerce and Customs of failing to satisfy statutory and regulatory obligations, were dismissed below on standing, ripeness, or Twombly grounds. Dismissal of these claims is appropriate. First, we conclude that Counts 11 and 13 must fail because they involve discretionary agency actions, which are unreviewable in federal court under Heckler, 470 U.S. at 821, 105 S.Ct. 1649. Next, we find that Counts 8-10, 12 and 15 fail to state a claim upon which relief can be granted because the Complaint lacks the factual matter necessary to satisfy the pleading requirements set forth in Twombly, 550 U.S. at 544, 127 S.Ct. 1955. Finally, given an admission by Plaintiffs, Count 14 must also fail. [5] On appeal, the Government argues that the Court of International Trade properly dismissed Claims 11 and 13 because these claims involve discretionary agency actions not subject to judicial review under Heckler. Plaintiffs respond by contending that the actions addressed in Claims 11 and 13 are required and ministerial, as opposed to discretionary, and are thus not protected by Heckler. We agree with the Government. [6] In Heckler, the Supreme Court addressed the extent to which a decision of an administrative agency to exercise its `discretion' not to undertake certain enforcement actions is subject to judicial review under the Administrative Procedure Act, 5 U.S.C. § 501 et seq.  470 U.S. at 823, 105 S.Ct. 1649. The plaintiffs, prison inmates sentenced to death by lethal injection, alleged that the use of particular drugs for capital punishment violated certain provisions of the Federal Food, Drug, and Cosmetic Act (FDCA). They requested that the Food and Drug Administration (FDA) take various enforcement actions to prevent the alleged violations, including affixing warnings on drugs and instructing prison administrators not to use the drugs for execution purposes. Id. at 823-24, 105 S.Ct. 1649. The FDCA, however, contained no provisions requiring the FDA to take any of the actions requested by the plaintiffs. Id. at 835, 105 S.Ct. 1649. Instead, [t]he Act's enforcement provisions ... commit[ed] complete discretion to the Secretary to decide how and when they should be exercised. Id. The Court explained that in situations where an agency invokes its discretion to refuse to take enforcement steps, the presumption is that judicial review is not available. Id. at 831, 105 S.Ct. 1649. The Court provided the following basis for this presumption: First, an agency decision not to enforce often involves a complicated balancing of a number of factors which are peculiarly within its expertise. Thus, the agency must not only assess whether a violation has occurred, but whether agency resources are best spent on this violation or another, whether the agency is likely to succeed if it acts, whether the particular enforcement action requested best fits the agency's overall policies, and, indeed, whether the agency has enough resources to undertake the action at all. An agency generally cannot act against each technical violation of the statute it is charged with enforcing. The agency is far better equipped than the courts to deal with the many variables involved in the proper ordering of its priorities.... In addition to these administrative concerns, we note that when an agency refuses to act it generally does not exercise its coercive power over an individual's liberty or property rights, and thus does not infringe upon areas that courts often are called upon to protect. Similarly, when an agency does act to enforce, that action itself provides a focus for judicial review, inasmuch as the agency must have exercised its power in some manner. The action at least can be reviewed to determine whether the agency exceeded its statutory powers. Id. at 831-32, 105 S.Ct. 1649 (citations omitted). The presumption that judicial review is not available may be rebutted where the substantive statute has provided guidelines for the agency to follow in exercising its enforcement powers. Id. at 832-33, 105 S.Ct. 1649. Indeed, in establishing this presumption in the APA, Congress did not set agencies free to disregard legislative direction in the statutory scheme that the agency administers. Id. at 833, 105 S.Ct. 1649. In Heckler, however, the Supreme Court concluded that the FDCA's enforcement provisions, which committed complete discretion to the Secretary, were insufficient to overcome the presumption. Id. at 835, 837, 105 S.Ct. 1649. Therefore, the Court held that [t] he FDA's decision not to take the enforcement actions requested by respondents [was] ... not subject to judicial review under the APA. Id. at 837-38, 105 S.Ct. 1649. Notably, the Supreme Court in Heckler discussed Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971), a case where the petitioners sought to prevent construction of an interstate highway through a park in Tennessee. Id. at 406-07, 91 S.Ct. 814. The federal statute at issue in Overton Park provided that the Secretary shall not approve any program or project using public parkland if a feasible and prudent alternative route exists. Id. at 405, 91 S.Ct. 814. The Court found that the petitioners, who argued that this statute prohibited the Secretary from authorizing construction of the road, were entitled to judicial review because the Secretary's decision ... d[id] not fall within the [APA's] exception for action `committed to agency discretion.' Id. at 410, 91 S.Ct. 814. Indeed, [t]his is a very narrow exception. Id. Heckler distinguished Overton Park, explaining that Overton Park did not involve an agency's refusal to take requested enforcement action. It involved an affirmative act of approval under a statute that set clear guidelines for determining when such approval should be given. Refusals to take enforcement steps generally involve precisely the opposite situation, and in that situation we think the presumption is that judicial review is not available. Heckler, 470 U.S. at 831, 105 S.Ct. 1649. In Counts 11 and 13, Plaintiffs allege that Customs failed to issue demand letters to sureties when importers missed duty payments (Count 11) and unlawfully wrote off duties as uncollectable (Count 13). As the Government points out, however, Plaintiffs fail to identify any law requiring Customs to issue a demand letter to a surety within a particular period of time. We are aware of no such law. Plaintiffs also fail to identify a law prohibiting Customs from writing off a debt. Once again, we are aware of no such law. In other words, Customs has discretion when deciding whether to engage in the conduct described in Counts 11 and 13. That Customs has this discretion makes sense, since this agency is in the best position to decide whether to devote federal resources towards obtaining relief from sureties, or whether such efforts would be wasteful. Because Customs possesses the discretion to perform the agency actions described in Counts 11 and 13, these claims fail under Heckler. With regard to the remaining claims, we conclude that Heckler does not apply to preclude judicial review of Counts 8-10, and 15 because these counts allege discrete agency actions (or failures to take discrete agency actions) that either Customs or Commerce was required to take. See Norton v. S. Utah Wilderness Alliance, 542 U.S. 55, 64, 124 S.Ct. 2373, 159 L.Ed.2d 137 (2004) (A plaintiff attempting to challenge an agency's failure to act under the Administrative Procedure Act can only do so in federal court if that failure to act involves a discrete agency action that [the agency] is required to take. ). Therefore, we find that Plaintiffs have standing to assert these claims. Regarding Count 12, the Government argues that Plaintiffs cannot succeed under this claim for the same reasons that Counts 1, 2, and 6 fail: because Plaintiffs do not qualify as intended third-party beneficiaries. Unlike Counts 1, 2, and 6, however, Count 12 does not simply involve an attempt to enforce the bond contracts. Instead, Plaintiffs accuse Customs in Count 12 of acting outside of its statutory authority by cancelling antidumping duties associated with bond contracts, contending that Commerce rather than Customs has this authority. Plaintiffs' failure to qualify as intended third-party beneficiaries does not prevent them from making this type of challenge. Moreover, the fact that Count 12 accuses Customs of acting without authorization, as opposed to failing to act when required by law, means that the presumption of no judicial review discussed in Heckler does not apply to this claim. For these reasons, we find that jurisdiction exists over Count 12. As explained below, however, we conclude that Counts 8-10, 12, and 15 must be dismissed because they fail to state a claim upon which relief can be granted under Twombly, 550 U.S. at 544, 127 S.Ct. 1955. In Count 8, Plaintiffs allege that Commerce failed to issue liquidation instructions to Customs, which resulted in uncollected antidumping duties. In Counts 9, 10, 12 and 15, Plaintiffs target Customs, not Commerce, asserting that Customs: (1) failed to assess final antidumping duties (Count 9); (2) failed to distribute collected duties to the domestic producers in accordance with the CDSOA (Count 10); (3) unlawfully compromised, or settled, antidumping duties secured by new shipper bonds (Count 12); and (4) failed to provide the Department of Justice with notice letters when sureties did not meet payment obligations (Count 15). The Government argues on appeal that Plaintiffs' Complaint is devoid of facts and cannot satisfy the pleading requirements set forth in Twombly. In response, Plaintiffs contend that their Complaint does contain factual detail sufficient to meet the thresholds of Court of International Trade Rule 8 and Twombly. Additionally, Plaintiffs assert that the Court of International Trade parsed each count of the Complaint individually, failing to properly consider the counts within the context of the antidumping duty assessment and collection process. We agree with the Government and conclude that dismissal of Counts 8-10, 12, and 15 under Twombly is appropriate because Plaintiffs failed to allege any specific instances where Commerce and Customs actually committed the harms alleged in these claims. [7] Under Court of International Trade Rule 8(a)(2), a pleading must contain a short and plain statement of the claim showing that the pleader is entitled to the relief. The Supreme Court explained in Twombly that while Rule 8 does not require detailed factual allegations, it does require more than labels and conclusions. Twombly, 550 U.S. at 555, 127 S.Ct. 1955. Indeed, a formulaic recitation of the elements of a cause of action will not do. Id. (citing Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986)). The [f]actual allegations must be enough to raise a right to relief above the speculative level. Id. To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to `state a claim of relief that is plausible on its face.' Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955). 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. (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955). The 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.; see Twombly, 550 U.S. at 557-58, 127 S.Ct. 1955 (something beyond the mere possibility ... must be alleged). Determining whether a complaint states a plausible claim for relief will... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. Iqbal, 129 S.Ct. at 1950. In Claims 8-10, 12, and 15, Plaintiffs allege that Commerce and Customs failed to take various actions required by law involving the assessment, collection, and distribution of antidumping duties, and that these failures resulted in uncollected and undistributed duties. In support of its claims, Plaintiffs rely on public information published by Customs on its website indicating that Customs has failed to collect $723 million in final, assessed antidumping duties under the Four Orders over a six-year period. Thus, Plaintiffs' cause of action relies largely on the connection, if any, between (1) the alleged failure to follow the antidumping statutes and regulations and (2) the uncollected duties reported on Customs' website. Plaintiffs assert that given the substantial amount of uncollected duties, it is plausible to conclude and reasonable to infer that Commerce and Customs did not perform the statutory and regulatory obligations listed in Counts 8, 9, 12, and 15. According to Plaintiffs, it necessarily follows, then, that had the duties been collected they could have been distributed to the domestic producers under the CDSOA ( see Count 10). While Plaintiffs state that Customs failed to collect over $700 million in duties, their Complaint warrants dismissal because it contains no facts indicating that the conduct alleged in Counts 8-10, 12, and 15 actually occurred and caused the duties to be uncollected and undistributed. Indeed, Plaintiffs do not provide a single factual instance in their Complaint showing that Commerce failed to issue liquidation instructions to Customs when it was required to do so (Count 8) or that Customs: (1) failed to assess final antidumping duties when it was required to do so (Count 9); (2) failed to distribute collected duties to the domestic producers in accordance with the CDSOA when it was required to do so (Count 10); (3) unlawfully compromised, or settled, antidumping duties secured by new shipper bonds (Count 12); or (4) failed to provide the Department of Justice with a notice letter when it was required to do so (Count 15). While it is possible that Commerce and Customs engaged in the actions (or inactions) outlined in Claims 8-10, 12, and 15, and that this activity (or inactivity) resulted in a failure to collect and distribute the duties, Plaintiffs have not provided enough factual detail in the Complaint to render these conclusions plausible. See Iqbal, 129 S.Ct. at 1949; Twombly, 550 U.S. at 570, 127 S.Ct. 1955. Indeed, other scenarios not relating to Commerce or Customs' conduct could explain why Customs has not yet collected the $723 million. For example, the importers or sureties responsible for paying the duties could have gone out of business or declared bankruptcy. Furthermore, as the Government represented at oral argument, certain duties could be currently uncollected because they are subject to protests or pending collection actions. See Oral Arg. at 20:32-20:56, available at http://www.cafc.uscourts.gov/ oral-argument-recordings/XXXX-XXXX/all. In providing so few facts in support of their allegations, Plaintiffs have done nothing to separate the conduct alleged in Counts 8-10, 12 and 15 from a whole host of other possible alternatives. See Iqbal, 129 S.Ct. at 1951 (considering the existence of more likely explanations in finding that a claim lacked plausibility). For these reasons, we conclude that Plaintiffs have failed to nudge Counts 8-13 and 15 across the line from conceivable to plausible. See Twombly, 550 U.S. at 570, 127 S.Ct. 1955. Therefore, these claims must be dismissed. Notably, as the Supreme Court explained in Twombly, a district court must retain the power to insist upon some specificity in pleading before allowing a potentially massive factual controversy to proceed. Id. at 558, 127 S.Ct. 1955. This rule rings especially true in the present case given the Government's obligation to compile an administrative record. Counts 8-10, 12, and 15 implicate virtually every meaningful step of the antidumping duty collection and distribution process and span a period of six years. The lack of factual specificity in these claims leaves the Government lost at sea when attempting to compile an administrative record. This further supports dismissal under Twombly. Plaintiffs argue that they cannot plead with more specificity because the facts necessary to make such a pleading are in the possession of the Government and are thus unattainable. We reject this argument. Plaintiffs' assertion is undermined by the fact that the record provides no indication that they made an effort to obtain the information from the Government that they now claim is unattainable (either through a Freedom of Information Act request or by simply calling or writing Commerce or Customs for information). [8] To be sure, this is not to say that Plaintiffs were required to file Freedom of Information Act requests or call Commerce and Customs in order to satisfy the Twombly standard. These examples simply highlight the fact that nothing in the record shows that Plaintiffs made an attempt to obtain the information that they now claim is unavailable.