Court Opinion

ID: 817726
Source: CourtListenerOpinion
Date Created: 2013-02-01 01:57:24.656939+00
Date Added: 2024-06-11T09:02:26.785800
License: Public Domain

Slip Op. 10-113

           UNITED STATES COURT OF INTERNATIONAL TRADE

______________________________
LIZARRAGA CUSTOMS              :
BROKER,                        :
                               :
               Plaintiff,      :
                               : Before: Richard K. Eaton, Judge
                               :
     v.                        : Court No. 08-00400
                               :
BUREAU OF CUSTOMS AND BORDER :
PROTECTION, U.S. DEPARTMENT OF:
HOMELAND SECURITY; and ROSA    :
HERNANDEZ, PORT DIRECTOR,      :
OTAY MESA, CALIFORNIA,         :
                               :
               Defendants.     :
______________________________:

                         OPINION AND ORDER

[Directing entry of defendant’s confession of judgment.]

                                             Dated: October 4, 2010

     Sandler, Travis & Rosenberg, P.A. (Arthur K. Purcell and
Kenneth N. Wolf), for plaintiff.

     Tony West, Assistant Attorney General; Barbara S. Williams,
Attorney in Charge, International Trade Field Office, Commercial
Litigation Branch, Civil Division, United States Department of
Justice (Justin R. Miller), for defendants.

     Eaton, Judge:   This matter is before the court for

consideration of defendants’ confession of judgment in

plaintiff’s favor (“Confession of Judgment”) and their motion for

a stay of the execution of the previously entered remand order1

1
     On March 26, 2010, the court remanded the case for
development of the record. See Guillermo Lizarraga Customs
Broker v. Bureau of Customs and Border Protection, Court No. 08-
00400, Order at 2—4 (Mar. 26, 2010) (“Remand Order”). The Remand
Court No. 08-00400                                            Page 2

pending the judgment’s entry.   Defendants’ self-styled Confession

of Judgment was filed in response to the pending motion for a

preliminary injunction made by Guillermo Lizarraga Customs Broker

(“plaintiff” or “Lizarraga”).   By his motion, Lizarraga sought,

among other things, an order “enjoining defendants from

suspending or deactivating [his] broker entry filer code in the

port of San Diego, C[alifornia].”   Pl.’s Mem. Supp. Mot. Prelim.

Injunc. (“Pl.’s PI Mem.”) 1.

     Jurisdiction is had under 28 U.S.C. § 1581(i)(4) (2006).2

For the reasons set forth below, the court will enter the

Confession of Judgment in accordance with this opinion.

                             BACKGROUND

I.   Factual Background

     A.   Entry Filer Code

     An entry filer code is a unique, three character code that

Customs and Border Protection (“Customs”) assigns to a licensed

customs broker.   19 C.F.R. § 142.3a(b)(1) (2009).   Filing

“entries” means the filing of documentation required to ensure

the release of imported merchandise from Customs’ custody, or the

Order directed the appointment of an administrative law judge to
hear evidence and make findings related to plaintiff’s injury
claim. Id.
2
     Defendants conceded this Court’s jurisdiction over the case
in their Answer to the Verified Complaint. Answer ¶ 1.
Court No. 08-00400                                                Page 3

act of filing that documentation.      19 C.F.R. § 141.0a(a).

     Entries can be filed either manually or electronically

through the Automated Broker Interface (“ABI”) system.      19 C.F.R.

§§ 143.34, 143.32(a).    Currently, ninety-six percent of all

entries are filed electronically, and that figure is likely

higher for licensed brokers.     See Automated Broker Interface

(ABI), CBP.GOV,

http://www.cbp.gov/xp/cgov/trade/automated/automated_systems/abi/

(last visited Sept. 30, 2010).    Each electronically-filed entry

is identified by an entry number created by the broker.      19

C.F.R. § 142.3a(a), (b).    The first three digits of the entry

number is the broker’s entry filer code.      19 C.F.R.

§ 142.3a(b)(1).    Accordingly, the entry filer code identifies the

broker filing a particular entry.      Id.   The ABI system is part of

Customs’ Automated Commercial System (“ACS”) that allows entry

filers to both submit data electronically and receive messages

from Customs.     19 C.F.R. § 143.1.   In order to file

electronically, the broker must have an active entry filer code

and be approved for participation in the ABI system.      19 C.F.R.

§§ 143.2, 143.34.    The purpose of ABI is “to improve

administrative efficiency, enhance enforcement of customs and

related laws, lower costs[,] and expedite the release of cargo.”

19 C.F.R. § 143.1.    The filer code allows the quick filing of

entries via ABI and “provides additional time, 10 business days
Court No. 08-00400                                             Page 4

from the date Customs releases the goods, to submit estimated

duties.”     Pl.’s PI Mem. 7.

        Once the entry information is put into the ACS system, it is

processed electronically through a set of “selectivity criteria.”

Defs.’ Mem. Opp. Mot. Prelim. Injunc. (“Defs.’ Mem.”) 4; see also

19 C.F.R. § 143.32(o).    The selectivity criteria allow Customs to

target certain shipments for examination based on elevated risk

factors.     Defs.’ Mem. 4.

        Under 19 C.F.R. § 142.3a(d), “[t]he Assistant Commissioner,

Office of International Trade, or his designee may refuse to

allow use of an assigned entry filer code if it is misused by the

importer or broker.”    It is the agency action taken by Customs to

suspend Lizarraga’s entry filer code that is the subject of this

case.

        B.   Suspension of Plaintiff’s Entry Filer Code

        On October 21, 2008, the Director of Field Operations at the

Otay Mesa Port of Entry in San Diego, California wrote to the

Assistant Commissioner of the Office of International Trade and

“requested that Mr. Lizarraga’s entry filer code be deactivated

for misuse.”    Defs.’ Mem. 6 (citing Administrative Record (“AR”)

152).    Customs then conducted an “internal administrative review”

of the Director’s request.      See Defs.’ Mem. 6—7 (describing the

review process).    On November 3, 2008, the Assistant Commissioner
Court No. 08-00400                                               Page 5

“made the final determination to indefinitely and immediately

suspend Mr. Lizarraga’s entry filer code” for misuse (a final

determination later memorialized in a letter to Mr. Lizarraga

dated November 10, 2008).    Defs.’ Mem. 7; see AR 156.    The

Assistant Commissioner noted that “[t]he suspension is necessary

to prevent Mr. Lizarraga from using his individual filer code to

facilitate smuggling narcotics into the Customs territory of the

United States and allowing the use of his license, permit, and

filer code . . .    by Mexican nationals.”   AR 155.   Customs did

not provide Lizarraga with notice of its internal administrative

review or an opportunity for a hearing, or solicit a written

submission from him prior to its final determination.

       Instead, by letter dated November 10, 2008,3 Customs

notified plaintiff that, effective November 14, 2008, it would

“immediately and indefinitely” suspend his entry filer code.       AR

156.    The notice cited as authority for defendants’ action 19

C.F.R. § 142.3a(d),4 and stated that the action was “necessary to

prevent the misuse of [Lizarraga’s] filer code in the conducting

of customs business.”    AR 156.   The notice also stated that the

suspension was to prevent Mr. Lizarraga from using his individual

3
     Plaintiff received this notice on November 11, 2008.
Affidavit of Guillermo Lizarraga ¶ 2.
4
     Under 19 C.F.R. § 142.3a(d), “[t]he Assistant Commissioner,
Office of International Trade, or his designee may refuse to
allow use of an assigned entry filer code if it is misused by the
importer or broker.”
Court No. 08-00400                                           Page 6

filer code to “facilitate smuggling narcotics” and to ensure that

plaintiff’s “license, permit, name[,] and filer code are not used

by persons who are not employed by [Lizarraga] and authorized to

act for [Lizarraga].”    AR 156.

     The notice further stated:

          By requiring you to use the alternative
          filing procedures found in 19 C[.]F[.]R[.]
          § 142.3a(e), [Customs] will be able to
          effectively review the accuracy of the
          documentation you are submitting for the
          entry of merchandise. This will enable you
          to continue conducting customs business;
          however, you will be required to file
          entry/entry summary documentation using
          customs assigned numbers with estimated
          duties attached before the merchandise may be
          released.

AR 156.

     Plaintiff argues that Customs’ actions were an unlawful

denial of due process:

               Besides being given only a few days
          notice, Mr. Lizarraga was not afforded the
          benefit of a hearing or an opportunity to
          make a written submission prior to being
          notified of his filer code deactivation.

Pl.’s PI Mem. 4.

     In addition, although Customs stated that plaintiff would be

able to conduct his business without using his filer code,

Lizarraga insists that:

          Without access to an entry filer code, in
          today’s electronic environment plaintiff
          cannot realistically compete with all other
          brokers who have such filer codes. Without a
          filer code, plaintiff will be forced to spend
Court No. 08-00400                                           Page 7

          many hours manually filing entries, incur
          delays in processing, and be required to
          immediately pay estimated duties at the time
          of filing. Moreover, because 90% of
          plaintiff’s clients import FDA-regulated
          produce, manual filing creates additional
          processing delays, including the fact that
          for weekends Customs has imposed on Mr.
          Lizarraga a mere two-hour window to present
          FDA documentation.

Pl.’s PI Mem. 7 (citations omitted); see also Affidavit of

Guillermo Lizarraga (“Lizarraga Aff.”) ¶¶ 7, 8 (stating that

without an entry filer code “it is virtually impossible to

conduct business” and “clients will go to other brokers with

active filer codes”).   Thus, Lizarraga contends that “suspending

a broker’s entry filer code effectively puts that broker out of

business because it is impossible to compete with other licensed

brokers with active filer codes.”   Pl.’s PI Mem. 2.   Accordingly,

he argues, suspension of his filer code would be “paramount to a

de facto suspension or revocation of his license, in which

plaintiff has a property interest.”   Pl.’s PI Mem. 2.

     Plaintiff’s arguments are echoed by the amicus curiae brief

submitted by the National Customs Brokers and Forwarders

Association of America, Inc.:

               The inability to use its entry filer
          code is nothing less than crippling to a
          customs broker’s business. . . .

               An importer relies upon its broker for
          the expedient and accurate filing of customs
          entries. In today’s high-paced trade
          environment, speed in clearing goods through
Court No. 08-00400                                          Page 8

            Customs is of paramount importance to
            importers. Automation in Customs’ systems
            parallels this trend. Importers simply will
            not employ the services of a customs broker
            who can only offer manual entry filing, which
            will demonstrably result in the delayed
            release of shipments. In many ports, the
            Customs entry personnel who would be required
            to transmit manual entry data into ACS
            typically only work from 8 a.m. to 4 p.m.
            Thus, input into ACS for manual entry filings
            could only occur during those times.
            Moreover, Customs no longer assigns personnel
            dedicated to this task since manual filing
            has become so infrequent.

                 By contrast, an ABI-enabled broker can
            file the entry at any time and secure the
            release of the shipment from Customs
            virtually 24 hours a day. Customs itself has
            acknowledged this advantage to ABI, listing
            “[e]xpedited cargo release” first among
            several ABI benefits to the trade.

Br. of Amicus Curiae National Customs Brokers and Forwarders

Ass’n of America, Inc. in Support of Pl. 4—5 (footnotes omitted);

see also Mem. Amicus Curiae Pacific Coast Council of Customs

Brokers and Freight Forwarders Ass’ns in Support of Pl.’s Mot. 4

(“Lifting of a broker’s filer code is tantamount to putting them

out of business.”).   Thus, plaintiff contends that defendants’

actions would “put Mr. Lizarraga out of business by removing his

right to file entries electronically via his filer code, thereby

degrading his commercial brokers’ license to the point of making

it virtually useless from a competitive standpoint” which

defendants “could not do without first providing statutory due

process.”   Pl.’s PI Mem. 3.
Court No. 08-00400                                           Page 9

II.   Proceedings in CIT

      On November 13, 2008, plaintiff filed a motion for a

temporary restraining order and preliminary injunction seeking to

enjoin

           defendants from suspending or deactivating
           plaintiff’s broker entry filer code in the
           port of San Diego, CA, in order to “prevent”
           the “misuse” of that filer code. The
           threatened action, made on three days notice
           under the alleged authority of 19 C.F.R.
           § 142.3a(d), was made without a hearing, an
           opportunity for petition, or other due
           process.

Pl.’s PI Mem. 1 (footnote omitted).   On November 14, 2008, after

a hearing with both sides present, the court granted plaintiff’s

motion, issued an order to show cause why a preliminary

injunction should not be granted, and set a hearing date.    A

briefing schedule was established, which was subsequently

modified by the parties.   Thereafter, defendants also agreed to

take no action against plaintiff’s entry filer code until the

court ruled on the preliminary injunction.   See Lizarraga Customs

Broker v. United States, Court No. 08-00400, Order at 2 (Dec. 23,

2008) (acknowledging defendant’s consent not to suspend

plaintiff’s entry filer code during the time the preliminary

injunction is pending); see also Lizarraga Customs Broker v.

United States, Court No. 08-00400, Order at 1 (Feb. 24, 2010)

(reiterating that defendant will not suspend plaintiff’s entry
Court No. 08-00400                                          Page 10

filer code until the court rules on the motion for preliminary

injunction).

       Also, on November 14, 2008, plaintiff filed his verified

complaint alleging, among other things, that he is a licensed

customhouse broker and that Customs has “issued a notice . . .

that plaintiff’s entry filer code will be deactivated effective

November 14, 2008.”   Compl. ¶¶ 2, 5.   Plaintiff’s complaint

alleges that “Customs’ plan to suspend or deactivate plaintiff’s

entry filer code without any explanation or hearing is

effectively a revocation or suspension of plaintiff’s broker’s

license without any showing of good cause and without the benefit

of a hearing or other due process   protections.”   Compl. ¶ 21.

In addition to the preliminary injunction, the complaint seeks

relief in the form of a declaratory judgment and a permanent

injunction restraining the defendants from suspending his entry

filer code “without a hearing providing for basic due process . .

. .”   Compl. ¶ 23(c).

       On January 12, 2009, defendants filed their answer to the

complaint.   On January 23, 2009, defendants filed the

administrative record, and on March 27, 2009, they filed their

motions to dismiss and for judgment on the agency record.   Since

that time, the parties have briefed requests to file amicus

curiae briefs, which the court granted on June 10, 2009.    In

addition, the parties have briefed, and the court has heard
Court No. 08-00400                                           Page 11

arguments on, defendants’ motion for a stay pending voluntary

remand, which, based on plaintiff’s objections, the court denied

on August 6, 2009.   Subsequently, the parties briefed and the

court granted defendants’ request to file an amended answer.     The

amended answer was filed on September 17, 2009.   Briefing of the

pending motions was complete as of November 13, 2009.   Oral

argument was held on February 24, 2010.    At the conclusion of the

February 24 hearing, the court stayed proceedings until March 10

to provide the parties an opportunity to pursue settlement.

Thereafter, the parties informed the court that they were unable

to reach a settlement during this period.   On March 26, 2010, the

court issued an order remanding the matter to Customs solely for

the purpose of making a record with respect to plaintiff’s claim

that the suspension of his entry filer code would be tantamount

to a revocation of his broker’s license.    See Remand Order.

     On April 23, 2010, defendants filed the Confession of

Judgment5 in plaintiff’s favor and a motion for a stay of the

execution of the remand order pending entry of the Confession of

Judgment.   Defendants insist that the Confession of Judgment ends

5
     The Confession of Judgment requests “judgment granting
relief in favor of plaintiff Guillermo Lizarraga (Mr. Lizarraga),
as stated herein and in the proposed order, be entered . . . .”
Confession of Judgment 1. Further, it offers the following
“confession of judgment: we agree not to suspend or deactivate
Mr. Lizarraga’s entry filer code for any past fact or event
(i.e., for any fact or event that will have occurred prior to the
entry of the attached proposed Court order.).” Confession of
Judgment 3 (footnote omitted).
Court No. 08-00400                                           Page 12

the lawsuit because defendant’s “agreement” “not to suspend or

deactivate Mr. Lizarraga’s entry filer code for any past fact or

event (i.e., for any fact or event that will have occurred prior

to the entry of the attached proposed Court order) . . . , [means

that] there is no longer a justiciable case or controversy

between the parties and [thus] this action must be dismissed.”

Confession of Judgment 3.

     In response, plaintiff argues that

                While defendants may be free to confess
          a judgment as to whether they will continue
          to pursue filer code deactivation under the
          facts of this case, that does not moot the
          case, as plaintiff’s claims also involve
          requests for declaratory and injunctive
          relief aimed at addressing the legality of
          defendant’s actions and preventing such
          illegal actions from being repeated against
          Mr. Lizarraga. As the legality of
          defendants’ action remains in dispute, and
          this Court has the power to issue declaratory
          and injunctive relief, the action is not
          moot.

Pl.’s Resp. Def.’s Conf. Judgment (“Pl.’s Resp.”) 2.   Plaintiff

thus contends that the confession of judgment should be rejected

or, alternatively, “must not be construed as rendering moot the

claims contained in plaintiff’s Complaint, and this action should

not be dismissed.”   Pl.’s Resp. 2.   Oral argument on the

Confession of Judgment took place on July 15, 2010.    See Tr. of

Conf. Or. Arg. (“Tr. Or. Arg.”).
Court No. 08-00400                                              Page 13

                               DISCUSSION

I.      Mootness

        This Court may decide legal questions only in the context of

actual cases or controversies.     U.S. CONST. art. III, § 2.    Where

an active case or controversy no longer exists, a case becomes

moot.     See Alvarez v. Smith, __ U.S. __, __, 130 S. Ct. 576,

580—81 (2009)(“[A] dispute solely about the meaning of a law,

abstracted from any concrete actual or threatened harm, falls

outside the scope of the constitutional words “Cases” and

“Controversies.”) (citations omitted) (“Alvarez”).

        The Supreme Court’s admonition, however, is subject to the

rule developed to address the situation where a defendant may

seek to repeat unlawful behavior.     “It is well settled that a

defendant’s voluntary cessation of a challenged practice does not

deprive a federal court of its power to determine the legality of

the practice.      If it did, the courts would be compelled to leave

the defendant . . . free to return to his old ways.”      Friends of

the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S.

167, 189 (2000) (citation and quotation omitted).     Given that,

“the test for mootness in cases such as this is a stringent one.

. . . A case might become moot if subsequent events made it

absolutely clear that the allegedly wrongful behavior could not

reasonably be expected to recur.”      City of Mesquite v. Aladdin’s

Castle, Inc., 455 U.S. 283, 289 n.10 (1982) (quoting United
Court No. 08-00400                                            Page 14

States v. Concentrated Exp. Phosphate Ass’n, 393 U.S. 199, 203

(1968)).   Accordingly, in order to demonstrate mootness, it must

be shown that unlawful behavior cannot “reasonably be expected to

recur.”

II.   Defendant’s Confession of Judgment Moots Plaintiff’s Claims

      Here, it is apparent that the Confession of Judgment

eliminates the “concrete actual or threatened harm” facing Mr.

Lizarraga.   That is, Customs’ concession that it will “not

suspend or deactivate Mr. Lizarraga’s entry filer code for any

past fact or event,” when reduced to a judgment, will remove the

threat that his business will be harmed as a result of the

findings of the internal investigation.   Thus, the controversy

over Customs’ disputed conduct will be rendered moot because any

injury resulting from the conduct will be voluntarily checked.

      Plaintiff, however, would have the court continue the case

to make findings as to the legality of defendants’ behavior.     To

do so, however, would require the court to continue its efforts

to create an adequate record with respect to the degree of injury

that would result to Mr. Lizarraga’s business if his entry filer

code were revoked (i.e., whether the indefinite suspension of an

entry filer code is a “de facto” suspension or revocation of a

broker’s license).   See generally Remand Order.   Put another way,

in order to determine plaintiff’s due process rights, the extent
Court No. 08-00400                                             Page 15

to which his entry filer code is required for him to carry on a

viable business would have to be known.    See Lowe v. Scott, 959

F. 2d 323, 339 (1st Cir. 1992) (finding that a doctor had a

protected property interest in not only his medical license, but

also the part of the license that authorized him to supervise

nurse midwives).

     Like Dr. Lowe, plaintiff contends that the deactivation of

his entry filer code negatively impacts the broker’s license in

which he has a protected property interest.   In order to decide

this question, however, the court would have to create a factual

record.    This was the purpose of the court’s Remand Order.    To

continue this inquiry in the absence of a live case or

controversy, however, would result in the kind of holding the

Supreme Court has warned against.    See Alvarez, __ U.S. at __,

130 S. Ct. at 580—81.   In other words, it would continue these

proceedings even though any findings that would result would have

no effect on the concrete question that was the subject of the

lawsuit.

     In addition, it has been sufficiently demonstrated that

defendants’ allegedly wrongful behavior cannot reasonably be

expected to recur.   At oral argument defendants represented to

the court that Customs would not seek to summarily suspend a

broker’s entry filer code:   “Well, we know for certain that

brokers are entitled to the [Administrative Procedure Act
Court No. 08-00400                                           Page 16

(“APA”)]6 if their entry filer code is deactivated, the

procedur[al] protections of the APA.   So with respect to what

occurred to Mr. Lizarraga in this instance, the Customs treatment

of Mr. Lizarraga, it’s certain that that is not going to occur

again.”   Tr. Or. Arg. 10:13—18.   Further, in their amended answer

defendants state: “[D]efendants admit that the suspension or

deactivation of a broker’s entry filer code must comport with 5

U.S.C. § 558.”   Am. Answer ¶ 22(iii); see also Tr. Or. Arg. at

11:7—19 (acknowledging same).   Given defendants’ representations,

the court finds that the allegedly wrongful behavior at issue

cannot reasonably be expected to reoccur.

     It is important to note, however, that the court is not

finding that the due process afforded by 5 U.S.C. § 558 will

necessarily be legally sufficient under the facts or

6
        Counsel was making reference to 5 U.S.C. § 558(c),
entitled “Imposition of Sanctions; determination of applications
for licenses; suspension, revocation, and expiration of
licenses,” which states, in relevant part:

     Except in cases of willfulness or those in which public
     health, interest, or safety requires otherwise, the
     withdrawal, suspension, revocation, or annulment of a
     license is lawful only if, before the institution of
     agency proceedings therefor, the licensee has been
     given—

          (1) notice by the agency in writing of the facts
     or conduct which may warrant the action; and

          (2) opportunity to demonstrate or achieve
     compliance with all lawful requirements.
Court No. 08-00400                                         Page 17

circumstances of a future case.   Thus, the court is not

determining whether the provisions of § 558 will provide adequate

legal due process under circumstances yet unknown.

                           CONCLUSION

     For the reasons set forth above, defendants’ Confession of

Judgment shall be entered in the form determined by the court and

plaintiff’s pending motion for preliminary injunction is

therefore declared moot and accordingly denied.

                                          /s/ Richard K. Eaton
                                             Richard K. Eaton

Dated:    October 4, 2010
          New York, New York