Court Opinion

ID: 222648
Source: CourtListenerOpinion
Date Created: 2011-08-06 00:01:51+00
Date Added: 2024-06-11T17:28:55.777599
License: Public Domain

FILED
                              NOT FOR PUBLICATION                           AUG 05 2011

                                                                        MOLLY C. DWYER, CLERK
                       UNITED STATES COURT OF APPEALS                    U .S. C O U R T OF APPE ALS

                              FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA                          No. 09-55783
ex rel. ALVIN TAMANAHA,
                                                  D.C. No. 2:08-cv-03927-R-VBK
                Plaintiffs - Appellants,
                                                  MEMORANDUM *
  v.

FURUKAWA AMERICA, INC.,

                Defendant - Appellee.

and

FURUKAWA ELECTRIC, CO. LTD, a
Japanese corporation; et al.

                Defendants

                      Appeal from the United States District Court
                         for the Central District of California
                       Manuel L. Real, District Judge, Presiding

                           Argued and Submitted June 6, 2011
                                 Pasadena, California

            *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.

       **   The Honorable James S. Gwin, District Judge for the U.S. District
Court for Northern Ohio, Cleveland, sitting by designation.
Before: B. FLETCHER and N.R. SMITH, Circuit Judges, and GWIN, District
Judge.**

      Appellant and Qui Tam Relator Alvin Tamanaha appeals the district court’s

dismissal with prejudice of his False Claims Act action. We review a district

court’s denial of leave to amend for abuse of discretion, keeping in mind that “such

denial is strictly reviewed in light of the strong policy permitting amendment.”

Sisseton-Wahpeton Sioux Tribe of Lake Traverse Indian Reservation v. United

States, 90 F.3d 351, 355 (9th Cir. 1996) (quoting Texaco, Inc. v. Ponsoldt, 939

F.2d 794, 798 (9th Cir. 1991)). Finding that the district court abused its discretion

in dismissing the action without allowing Tamanaha’s requested leave to amend,

we reverse and remand.

      Tamanaha alleges that Furukawa submitted materially false information to

the United States Customs Service in order to undervalue—and thereby reduce

customs duties owed on—imported goods, in violation of the False Claims Act, 31

U.S.C. §§ 3729–3733 (2006). On Furukawa’s motion to dismiss, the district court

dismissed Tamanaha’s complaint for failure to state a viable False Claims Act

claim under Federal Rule of Civil Procedure 12(b)(6) and for failure to plead fraud

with particularity as required by Federal Rule of Civil Procedure 9(b). Tamanaha

requested leave to amend his complaint to allege more precisely that Furukawa

                                          2
violated a preexisting obligation to pay customs duties established by federal

regulation. The district court denied the request.

       A “court should freely give leave [to amend a complaint] when justice so

requires.” Fed. R. Civ. P. 15(a)(2). Where a plaintiff’s fraud allegations are

dismissed under Rule 12(b)(6) or for failure to comply with Rule 9(b)’s heightened

pleading standard, we have consistently held that “‘[l]eave to amend should be

granted if it appears at all possible that the plaintiff can correct the defect.’” Vess v.

Ciba-Geigy Corp. USA, 317 F.3d 1097, 1108 (9th Cir. 2003) (quoting Bly-Magee

v. California, 236 F.3d 1014, 1019 (9th Cir. 2001)).

       Any amendment to Tamanaha’s complaint would be the first. And, contrary

to the district court’s conclusion, such amendment would not be inherently futile.

First, Tamanaha could amend his complaint to plead that Furukawa sought to

decrease a fixed obligation to pay customs duties established by federal regulation.

Under customs regulations, importers have an existing, non-contingent and

nondiscretionary liability for customs duties. See, e.g., 19 C.F.R. §§ 141.4, 159.2

(demanding entry and liquidation of imported merchandise); 19 U.S.C. § 1503

(assessment of duties on imports is generally based on the appraised value of the

imported goods as determined on liquidation); Harmonized Tariff Schedule of the

United States (2011) (codified at 19 U.S.C. § 1202), available at

                                            3
http://www.usitc.gov/tata/hts/. Such liability arises immediately and automatically

upon the importation of goods into the United States. 19 C.F.R. § 141.1(b)(1).

Accordingly, false statements or records made to avoid or decrease this obligation

to pay—which Tamanaha could allege in an amended complaint—are actionable

under the False Claims Act’s reverse false claims provision. 31 U.S.C. §

3729(a)(7) (2006); United States v. Bourseau, 531 F.3d 1159, 1169 (9th Cir. 2008)

(requiring plaintiff in False Claims Act action to show that defendant, by false

statement, sought to conceal, avoid, or decrease a precise, preexisting obligation to

pay United States).

      Tamanaha could also amend his complaint to address the district court’s

stated reason for dismissing the action under Rule 9(b): that the original complaint

did not detail how Furukawa submitted its allegedly false statements and to whom.

Leave to amend would provide Tamanaha further opportunity to “state with

particularity the circumstances constituting fraud,” Fed. R. Civ. P. 9(b), although it

may be appropriate to relax Rule 9(b)’s heightened pleading standard to the extent

that evidence of the alleged false claims lies within Furukawa’s exclusive

possession, see United States ex rel. Lee v. SmithKline Beecham, Inc., 245 F.3d

1048, 1052 (9th Cir. 2001).

                                           4
      Tamanaha could thus cure any Rule 12(b)(6) or 9(b) defects by amending

his complaint to allege the specific sources of Furukawa’s preexisting obligation to

pay customs duties and to plead a False Claims Act violation with greater

particularity. Given Rule 15’s strong preference for allowing amendment, Foman

v. Davis, 371 U.S. 178, 182 (1962) (Rule 15(a)’s “mandate is to be heeded”),

Tamanaha should have the opportunity to amend.

      Because we find that the district court abused its discretion in denying

Tamanaha leave to amend his complaint, we need not directly reach the question of

whether the original complaint sufficiently pleaded a reverse False Claims Act

claim. Furthermore, we decline to reassign this case upon remand, finding no

indication from the record that District Judge Manuel Real could not fairly comply

with our mandate or that reassignment is necessary to preserve the appearance of

justice. See Earp v. Cullen, 623 F.3d 1065, 1071-72 (9th Cir. 2010).

      Upon remand, the district court is instructed to allow amendment to the

complaint.

      REVERSED AND REMANDED WITH INSTRUCTION.

                                          5