Opinion ID: 450368
Heading Depth: 1
Heading Rank: 7

Heading: miscellaneous liability questions.

Text: 122
123 Ven-Fuel asserts that it represented no false facts, but at most included in its permit application incorrect opinions. And, by analogy to tort law, the appellant argues that the mere expression of opinion, though ill-founded, cannot constitute a false misrepresentation. See 37 Am.Jur.2d, Fraud and Deceit, Sec. 45 (1968). Ven-Fuel characterizes the palpably untrue portions of its application as being no more than the sum of Arellano's opinions and interpretations. This line of defense is, however, doubly flawed. 124 We have scrutinized the record below, and find no sign that the appellant raised this point in any manner before the district court. Under our consistent practice ... a new game [cannot] be started at this date. Cohen v. President and Fellows of Harvard College, 729 F.2d 59, 60-61 (1st Cir.), cert. denied, --- U.S. ----, 105 S.Ct. 233, 83 L.Ed.2d 161 (1984). Except under the most extraordinary circumstances (not present here), we have regularly eschewed initial consideration at the appellate level of theories alien to the record, United States v. Kobrosky, 711 F.2d 449, 457 (1st Cir.1983), and we hew to that line in this instance. The failure of the appellant to ignite this blaze below extinguishes the ustulation for purposes of this proceeding. Cohen, supra; Kobrosky, supra; Eagle-Picher Industries v. Liberty Mutual Insurance, 682 F.2d 12, 22 n. 8 (1st Cir.1982), cert. denied, 460 U.S. 1028, 103 S.Ct. 1280, 75 L.Ed.2d 500 (1983); Johnston v. Holiday Inns, 595 F.2d 890, 894 (1st Cir.1979). 125 In any event, whatever embers remain of the appellant's argument are quickly doused by an examination of the application itself. Assuming arguendo that expressions of opinion are held to a more lenient standard than statements of fact for purposes of 19 U.S.C. Sec. 1592 (a proposition which it is not necessary for us to decide in the case at bar, and as to which we offer no view), it is starkly apparent that the application called for expressions of fact and that Ven-Fuel was obligated to respond in a factual manner. Ven-Fuel had neither a deepwater terminal under its operational control nor a throughput agreement with a deepwater terminal operator; it was, therefore, ineligible for the largesse of a fee-free license. Arellano was fully apprised of all of the relevant factual elements of the situation. Ven-Fuel was ineligible for an allocation and fee-exempt license to import residual fuel oil into the United States; the district court so found and the appellant concedes as much. When Arellano, acting for Ven-Fuel, certified that the corporation was eligible for the fee-free license, that certification was, in our opinion, utterly false as a matter of fact. 13 126
127 The appellant claims that the government's action against it ought to be foreclosed inasmuch as Ven-Fuel's problems were a direct result of misleading, ambiguous and conflicting information disseminated by the government. Appellant's Brief at 30. Ven-Fuel's asseveration in this regard centers around a series of inartfully-phrased letters from the federal Energy Office, bulletins issued by that agency on February 4, 1974 and February 15, 1974, and the publication on February 11, 1974 of proposed regulations, Proposed Rules Amending Oil Import Regulation 1 (Revision 5), 39 Fed.Reg. 5193 (1974), which were ultimately abandoned. 128 We need not discuss this evidence in detail. First, though estoppel was properly pleaded by the appellant as an affirmative defense, it failed entirely to proffer any argument on the point when the district court adjudicated liability. It is settled law that, when confronted with a Rule 56 motion for brevis disposition, a party invoking the doctrine of estoppel must advance the issue in appropriate fashion. Burke v. Gateway Clipper, Inc., 441 F.2d 946, 948-49 (3rd Cir.1971); 6 J. Moore, Moore's Federal Practice Sec. 56.17 (2d ed. 1982). When a motion for summary judgment is made and supported ... an adverse party may not rest upon the mere allegations or denials of his pleading.... Fed.R.Civ.P. 56(e). 129 To be sure, when Ven-Fuel attempted after the penalty phase trial to vacate the summary judgment on liability, it did argue the estoppel theory. It did not suggest--then or now--that all of the proof on the question was not before the district court. Judge Zobel carefully examined the relevant evidence, e.g., R.A. 536-37, and reaffirmed her finding on liability. R.A. 548. And, her rejection of the appellant's estoppel claim was by no means clear error. 130 As we have repeatedly held in a variety of contexts, the traditional doctrine of equitable estoppel does not apply fully in cases against the government. Akbarin v. Immigration and Naturalization Service, 669 F.2d 839, 842 (1st Cir.1982). At a minimum, the party raising the defense must have reasonably relied on some affirmative misconduct attributable to the sovereign. Id. 14 The rationale for the rule is clear: we are, after all, a nation ruled by laws not by men. The possibility of harm to a private party inherent in denying equitable estoppel its wonted reach is often (if not always) grossly outweighed by the pressing public interest in the enforcement of congressionally mandated public policy. Best v. Stetson, 691 F.2d 42, 44-45 (1st Cir.1982); Portmann v. United States, 674 F.2d 1155, 1167 (7th Cir.1982). Such considerations are peculiarly appropriate here, given the strong national interest in the integrity of the custom-house and in thwarting circumvention or honeycombing of the customs laws. Cf. Air-Sea Brokers, Inc. v. United States, 596 F.2d 1008, 1011 (C.C.P.A.1979) (estoppel not available in cases involving collection of import duties). 131 Viewed most charitably to the appellant, the record in this case demonstrates a certain vagueness and lack of artistry on the part of Interior's bureaucracy. But, neither carelessness, Simon v. Califano, 593 F.2d 121, 123 (9th Cir.1979), nor a reluctance to be of assistance, Lavin v. Marsh, 644 F.2d 1378, 1384 (9th Cir.1981), are tantamount to affirmative misbehavior. The evidence in this record in no way presented so compelling a case as to suggest affirmative misconduct, or as to intimate that Ven-Fuel could even begin to meet the heavy burden which it bore in this wise. See Heckler, 104 S.Ct. at 2224-26; Immigration and Naturalization Service v. Miranda, 459 U.S. at 19, 103 S.Ct. at 283; Schweiker v. Hansen, 450 U.S. 785, 788-90, 101 S.Ct. 1468, 1470-72, 67 L.Ed.2d 685 (1981); Lerner v. Gill, 751 F.2d 450, 458-459 (1st Cir.1985). 132 Likewise, the evidence is overwhelming that, to the extent (if at all) that Ven-Fuel relied on the somewhat sloppy actions of the government, such reliance was totally unreasonable. Arellano admitted that he never took the trouble to review the applicable regulations. And, he submitted the application in early March of 1974, despite having been advised by the Federal Energy Office that [f]inal regulations will be promulgated before the March 15 filing date; that no ... applications should be filed until the comments on the proposed rulemaking published in the Federal Register, February 11, 1974 have been received and final Regulations have been published; and that, if necessary, an extension of the March 15 filing date would be granted. Had the appellant abided by these instructions, the ambiguity of which it now complains would have vanished. 133
134 Relying on the by means of clause embodied in 19 U.S.C. Sec. 1592, the appellant argues that liability cannot attach under the statute absent a showing of materiality. A number of cases have engrafted such a requirement upon the statute's criminal counterpart, viz., 18 U.S.C. Sec. 542. See, e.g., United States v. Teraoka, 669 F.2d 577, 579 (9th Cir.1982); United States v. Ven-Fuel, Inc., 602 F.2d 747, 753 (5th Cir.1979); United States v. Rose, 570 F.2d 1358, 1363 (9th Cir.1978). No case has been cited to us which imposes a similarly stringent materiality requirement--or any materiality requirement at all, for that matter--under Sec. 1592; and our research has revealed none such. The district court questioned the authority of Teraoka in this circuit based on our decision in United States v. Murray, 621 F.2d 1163 (1st Cir.), cert. denied, 449 U.S. 837, 101 S.Ct. 112, 66 L.Ed.2d 44 (1980), and held, in any event, that the Teraoka rule, applied to the facts at bar, did not insulate Ven-Fuel from liability. Judge Zobel noted: 135 Here the importation of oil by the defendants was achieved by means of a false statement. But for the falsity, defendants never would have received a fee-free license. It is irrelevant that the oil could have been imported by someone else. The language of Sec. 1592 speaks to the relationship between an importer and his or her merchandise. Even under Teraoka the but for test must be applied in the context of this relationship. 136 United States v. Ven-Fuel, Inc., C.A. No. 80-335-Z, slip op. at 7 (D.Mass. Oct. 6, 1982) (footnote omitted). 137 We agree with the court below that, even if Teraoka applies, Ven-Fuel is nevertheless snared by the Sec. 1592 net. So, we need not resolve at this time any perceived conflict between Teraoka and Murray. 138 The appellant argues that the by means of language in Sec. 1592 serves to limit the grasp of the statute to those situations in which importation of the goods in question would not have been allowed but for the false practice or statement. Insofar as this contention suggests that Sec. 1592 would only apply where prohibited merchandise was imported, e.g., 19 U.S.C. Sec. 1307 (entry of imports manufactured by slave labor barred), it is entirely baseless. Such a restrictive reading would largely eviscerate the statute, rendering it meaningless in the vast majority of cases. And, even under 18 U.S.C. Sec. 542, criminal convictions have regularly been sustained where generically importable goods had been entered by trick or artifice. E.g., Murray, supra (false statements as to value and country of origin of glue); United States v. Brown, 456 F.2d 293 (2d Cir.), cert. denied, 407 U.S. 910, 92 S.Ct. 2436, 32 L.Ed.2d 684 (1972) (fraudulent undervaluation of telephones). 15 139 Once it is accepted that the only logical reading of Sec. 1592 extends the reach of the statute to false statements and practices anent lawfully importable merchandise, e.g., United States v. Twenty-Five Packages of Panama Hats, 231 U.S. 358, 34 S.Ct. 63, 58 L.Ed. 267 (1913) (civil forfeiture provision applies to attempted entry of misvalued headgear); United States v. Wagner, supra (Sec. 1592 covers apocryphal statements regarding origin of artificial limbs); United States v. Santini, 266 Fed. 303 (2d Cir.1920) (action to recover forfeiture value of quilts accompanied by bogus invoices); United States v. F.A.G. Bearings Corp., No. 83-9-01314, slip op. 84-109 at 12-13 (Ct. Int'l. Trade Oct. 4, 1984) (Sec. 1592 extends to misdescription of ball bearings and other components), the correctness of the district court's conclusion is inescapable. 140 The Fifth Circuit, in United States v. Ven-Fuel, Inc., supra (a case which we find factually distinguishable from Ven-Fuel's present plight), observed that materiality is to be applied as an objective test of the significance of a fact to the transaction under consideration, and requires a reasonable showing of the potential effects of the statement. 602 F.2d at 753. The government's case in the instance sub judice facilely meets even this rigorous standard. Given that the oil could not have been imported without a permit, the means which Ven-Fuel employed to obtain its ill-gotten license became the means by which it imported the merchandise. Under an objective test, Arellano's lies were significant in that they led directly and inexorably to the issuance of the license, and thereafter to the preferential fee-free entry of the oil. The potential effect of the misstatement was, in this case, one and the same as its actual effect. In the absence of such chicanery, the duty-exempt transaction could not have occurred. 16 141 Ven-Fuel has yet another string to its materiality bow. It suggests that, due to the shortage of fuel oil which plagued the nation in 1974, other importers had a surfeit of fee-free allocations and that Ven-Fuel could have used the tickets of some other importer, either free of charge or at a modest cost per barrel. Appellant's Brief at 37. Thus, the Ven-Fuelian thesis runs, if the appellant had not finagled the fee-free license, it would have induced a lawful holder of such a permit to front the entry of the merchandise. But, this argument is too cute by half. It overlooks the ban against the sale, assignment, or transfer of an allocation or license which existed in 1974. See, e.g., 32A C.F.R. Ch. X, Sec. 12(e) (1974). To say that a misrepresentation is immaterial because the culprit could have accomplished the same result by breaking yet another law is a proposition more suitable to Lewis Carroll than to the lexicon of federal statutory interpretation. 17 And, even apart from such an obvious rejoinder, a defendant must be judged by what it has done, not by what it might have done. Ven-Fuel's argument is akin to a shoplifter, apprehended in the act, laying claim to a right of exoneration by producing sufficient funds to show that, had he chosen not to steal, he could have paid full value for the merchant's wares. 142 The appellant's negligently-made false statement was sufficiently material to its illicit importation of residual fuel oil into the United States to sustain the district court's imposition of fault. 143