Court Opinion

ID: 3005121
Source: CourtListenerOpinion
Date Created: 2015-09-28 18:01:58.872634+00
Date Added: 2024-06-11T11:46:00.361197
License: Public Domain

Slip Op. 15- 111

            UNITED STATES COURT OF INTERNATIONAL TRADE

________________________________
UNITED STATES,                   :
                                 :
          Plaintiff,             :   Before: Nicholas Tsoucalas,
                                 :           Senior Judge
     v.                          :
                                 :   Court No.: 14-00289
JEANETTE PACHECO,                :
                                 :
          Defendant.             :
_____________________            :

                              OPINION

[Plaintiff’s Motion for Entry of Default Judgment is granted.]

                                              Dated:________________
                                                     September 28, 2015

Stephen C. Tosini, Senior Trial Counsel, Department of Justice,
Civil Division, Commercial Litigation Branch, of Washington, D.C.
With him on the brief were Benjamin C. Mizer, Principal Deputy
Assistant Attorney General, and Patricia M. McCarthy, Assistant
Director.

          Tsoucalas, Senior Judge:       Before the court is United

States’   (“Plaintiff”)   Motion   for   Default    Judgment    seeking

$2,651,312.18 in civil penalties plus interest, costs, and fees

against Defendant Jeanette Pacheco (“Pacheco”) for fraud under

section 592 of the Tariff Act of 1930, as amended, 19 U.S.C. §

1592 (2012). 1   Pl.’s Mot. for Entry of Default J. at 6, July 7,

1 Further citations to the Tariff Act of 1930 are to the relevant
portions of Title 19 of the U.S. Code, 2012 edition, and all
applicable amendments thereto, unless otherwise noted.
Court No. 14-00289                                                          Page 2

2015,   ECF    No.   9   (“Pl.’s    Br.”).      For   the    following   reasons,

Plaintiff’s motion is granted.

              From October 29, 2009, to approximately December 23,

2009, Pacheco entered thirty six entries of dried peppers into the

United States from Mexico.          Pl.’s Br. Decl. of Liza Lopez at ¶ 2,

June 22, 2015. Dionicio Bustamante (“Bustamante”) was the licensed

customs broker for each entry. Id. at ¶ 3.                    Homeland Security

Investigations conducted an investigation in which they discovered

that Bustamante approached Pacheco in a nightclub and told her

that he had a way to make “fast cash.”                      Pl.’s Br. Report of

Investigation Ex. B, at 2.          Subsequently, Bustamante gave Pacheco

$200, and in exchange, she provided him with a power of attorney

to allow him to use her name to conduct customs business on his

own behalf. Id.

              The entry documents submitted to Customs and Border

Protection (“CBP”) declared a transaction value of approximately

$0.11 per kilogram of dried peppers. Pl.’s Br. Decl. of Liza Lopez

at ¶ 5. The median transaction value for identical or similar

shipments of dried peppers is $3.75 per kilogram.                   Id. at ¶ 7.

Based on the aforementioned transaction values, CBP was concerned

that the dried peppers were undervalued, and consequently it

requested     documents    to   verify    the    claimed      transaction   value

through proof of payment and/or the terms of sale agreement for

the entries.     Id. at ¶ 6.       Pacheco failed to provide documentation
Court No. 14-00289                                                     Page 3

to   corroborate     the   declared   transaction   value     of   $0.11   per

kilogram.    Id. at ¶ 8.       Consequently, CBP appraised the entries

using a transaction value for similar merchandise to determine a

dutiable value of $2,285,550.00.        Id. at ¶ 9.

            The Food and Drug Administration (FDA) issued a Notice

of FDA Action refusing these entries as adulterated under section

402 of the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 342

(2012) 2 and barred them from entering the commerce of the United

States under 21 U.S.C. § 381(a). Id. at ¶ 12. The Notice of FDA

Action required Pacheco to redeliver the entries for exportation

or destruction. Id.        Pacheco failed to redeliver the goods.          Id.

at ¶ 13.

            As   a   result   of   Pacheco’s   failure   to   redeliver    the

entries, CBP assessed claims for liquidated damages for the subject

entries at the $0.11 per kilogram figure provided by Pacheco for

a total of $184,419.00.        Id. at ¶ 10; Pl.’s Br. Jeanette Pacheco

Claims for Liquidated Damages, Ex. D.

            CBP issued a Pre-Penalty notice to Pacheco on April 16,

2013, informing her that it sought a monetary penalty in the amount

2 Further citations to the Federal Food, Drug, and Cosmetic Act
are to the relevant portions of Title 21 of the U.S. Code, 2012
edition, and all applicable amendments thereto, unless otherwise
noted.
Court No. 14-00289                                               Page 4

of $2,651,312.18 for fraud under 19 U.S.C. § 1592.       Pl.’s Br. Pre-

Penalty Notice Ex. F, at 1.

            On April 24, 2013, CBP issued a penalty notice to Pacheco

seeking $2,651,312.18 for fraud under 19 U.S.C. § 1592.       Pl.’s Br.

Penalty Notice Ex. G, at 1-2. CBP sent to Pacheco demands for

payment of the penalty on May 7, 17, 30, 2013, and June 14, 2013.

Pl.’s Br. Decl. of Liza Lopez at ¶ 18.            To date, CBP has not

received any payments from Pacheco.      Id. at ¶ 19.

            Plaintiff filed the instant action on October 29, 2014.

Compl., Oct. 29, 2014, ECF No. 2.        Pacheco failed to answer or

otherwise respond to the complaint.           As a result, the Clerk of

Court entered Pacheco’s default on May 19, 2015. Entry of Default,

May 19, 2015, ECF No. 8. Plaintiff now moves for entry of default

judgment.    Pl.’s Br. at 1.

                               JURISDICTION
            The court possesses jurisdiction under section 201 of

the Customs Courts Act of 1980, 28 U.S.C. § 1582(1) (2012) over

this civil penalty action brought by the United States under 19

U.S.C. § 1592.

                                DISCUSSION
            Pursuant to 19 U.S.C. § 1592(e)(1), the Court determines

all issues de novo, including the amount of any penalty. 19 U.S.C.

§ 1592(e)(1). In evaluating a motion for a default judgment, the

Court accepts as true all well-pled facts in the complaint but
Court No. 14-00289                                                      Page 5

must reach its own legal conclusions.          United States v. Callanish

Ltd., 37 CIT ____, ____, Slip Op. 13-43 (Mar. 28, 2013) (citing

Nishimatsu Constr. Co., Ltd. v. Hous. Nat’l Bank, 515 F.2d 1200,

1206 (5th Cir. 1975)).      “Although a defendant’s default acts as an

admission of liability for all well-pled facts in the complaint,

it does not admit damages.”        United States v. Freight Forwarder

Int’l, 39 CIT ____, ____, 44 F. Supp. 3d 1359, 1362 (2015) (citing

Greyhound Exhibit Grp. Inc. v. E.L.U.L. Realty Corp., 973 F.2d
155, 158 (2d Cir. 1992)). “An entry of default alone . . . does

not suffice to entitle a plaintiff to the relief that it seeks.”

United States v. Country Flavor Corp., 36 CIT ____, ____, 825 F.

Supp. 2d 1296, 1301 (2012).       “Even after an entry of default, ‘it

remains for the court to consider whether the unchallenged facts

constitute a legitimate cause of action, since a party in default

does not admit mere conclusions of law.’” Id. (quoting 10A C.

Wright, A. Miller, & M. Kane, Federal Practice and Procedure §

2688, p. 63 (3d ed. 1998)).        “Because section 592(e) directs that

the   court    determine   ‘de   novo’   the   amount   of    penalty   to    be

recovered, the penalty cannot be considered a ‘sum certain’ to

which plaintiff has established its entitlement as a matter of

right.   United States v. Inner Beauty Int’l (USA) Ltd., 35 CIT

____, ____, Slip Op. 11-148 (Dec. 2, 2011).

              In the case at bar, the Clerk of Court has entered the

Defendant’s     Default,   and   Plaintiff     supported     the   Motion    for
Court No. 14-00289                                                      Page 6

Default Judgment with an affidavit showing the amount due. Entry

of Default; Compl. at ¶27, Ex. B; Pl.’s Br. Decl. of Liza Lopez.

Thus,   the    court   must   address   whether   the    unchallenged   facts

constitute a legitimate cause of action and what amount, if any,

should be awarded Plaintiff.

  1. The Unchallenged Facts          Constitute   a     Legitimate   Cause   of
     Action Per § 1592

              Under 19 U.S.C. § 1592(a)(1) it is unlawful for a person,

by fraud to enter, introduce, attempt, or aid or abet any other

person in introducing merchandise into the commerce of the United

States by means of any document or electronically transmitted data

or information, written or oral statement, or act which is material

and false, or any omission which is material.                   19 U.S.C. §

1592(a)(1). “A document, statement, act, or omission is material

if it has the natural tendency to influence or is capable of

influencing agency action including, but not limited to a . . .

[d]etermination        of     the   classification,       appraisement,      or

admissibility of merchandise . . . .”) 19 C.F.R. Part 171, appendix

B § (B) (2015) (“Penalty Guidelines”).

              In the instant case, the misrepresented entered value

was material, because it influenced CBP’s decision regarding the

admissibility of the peppers. Restricted merchandise such as dried

peppers are subject to inspection, may be conditionally released,
Court No. 14-00289                                                      Page 7

or the shipment may be placed on hold and later refused entry.

Customs may request redelivery of the refused shipment.          A refusal

to comply with the redelivery requirement may result in Customs

assessing liquidated damages at three times the value of the

merchandise.     19 C.F.R. § 141.113(c)(3) (2015).       Customs assessed

liquidated damages in the amount of $184,419.00 relying on the low

values provided by the importer. Pl.’s Br. Jeanette Pacheco Claims

for Liquidated Damages Ex. D, at 1-2. Had the importer given the

correct value of $3.75 per kilogram, Customs would have assessed

liquidated damages at $6,856,650.00 and required that the importer

post a bond in the amount of $6,856,650.00 or refused entry to the

merchandise. Pl.’s Br. Decl. of Liza Lopez Ex. A, at ¶ 11. Rather,

by misrepresenting the value of the peppers, Pacheco procured a

bond at a significantly lower amount, entered the merchandise and

sold it for consumption in the U.S. Id.

            Furthermore, by providing her identity to Bustamante for

$200 so that he could conduct customs business on his own behalf,

Pacheco aided and abetted his fraud upon Customs. Pl.’s Br. Report

of Investigation Ex. B, at 2. Having given Bustamante a power of

attorney, Pacheco, as principal, can be held liable for her agent

Bustamante’s actions whether or not she authorized the specific

unlawful conduct which constituted the violation of section 1592.

See United States v. Pan Pac. Textile Grp. Inc., 29 CIT 1013, 1022-

23,   395   F.   Supp.   2d   1244,   1252   (2005)   (holding   that    when
Court No. 14-00289                                                          Page 8

determining a principal’s liability, it is irrelevant whether or

not   the   principal       authorized    their     agent’s     conduct     which

constituted the violation of section 1592).

              Thus, the court finds that Plaintiff has demonstrated

that the unchallenged facts constitute a legitimate cause of action

under 19 U.S.C. § 1592.

  2. Amount of Damages

            Fraud is punishable by a civil penalty in an amount not

to exceed the domestic value of the merchandise.               19 U.S.C. § 1592

(c)(1). A “Plaintiff is not necessarily entitled to be awarded a

judgment for the maximum penalty available under section 592 as a

‘sum certain,’ as that term is used in Rule 55 . . . It is

appropriate that the court consider the facts and circumstances as

shown in plaintiff’s submissions.” Inner Beauty, 35 CIT at ____.

The Court examines whether there are aggravating or mitigating

factors present in assessing the penalty.                 Id.     Although not

binding on the Court, the guidelines published by Customs are

informative     on    the    general     question    of    what     constitutes

aggravating     and   mitigating       circumstances.     Id.      Under    those

guidelines,     for   a     Non-Duty     Loss     Violation,      “[a]     penalty

disposition greater than 80 percent of the dutiable value may be

imposed in a case involving an egregious violation, or a public

health and safety violation, or due to the presence of aggravating
Court No. 14-00289                                                           Page 9

factors, but the amount may not exceed the domestic value of the

merchandise.” Penalty Guidelines §(F)(2)(a)(ii).                   Undervaluation

of   duty-free       merchandise     such   as   dried   peppers     from   Mexico

constitutes a non-duty loss violation. Id. at §(D)(2).

               Providing misleading information to Customs concerning

the section 1592 violation and failing to comply with a lawful

demand for records are aggravating factors that permit a penalty

of   up   to    the    domestic     value   of   the   merchandise.         Id.   at

§(H) (3),(7).         In    this    case,    Pacheco     initially      lied      to

investigators about whether the peppers were hers, and she failed

to comply with Customs’ lawful demand for documentation verifying

the declared transaction value of $0.11 per kilogram. Pl.’s Br.

Report of Investigation Ex. B, at 1-2; Request for Information Ex.

C, at 1-2; Decl. of Liza Lopez Ex. A, at ¶ 8. Thus, the court finds

that aggravating factors are present in this case.

               Additionally, the following factors may be considered in

mitigation      of    the   penalty:   contributory      customs    error   (where

Customs provides Defendant with misleading or erroneous advice in

writing);       Defendant’s        cooperation    with    the      investigation;

immediate remedial action taken by Defendant; inexperience in

importing (only where the violation is not due to fraud); prior

good record (excluding fraud violations); inability to pay the

Customs penalty; and Customs’ failure to notify Defendant of a
Court No. 14-00289                                          Page 10

violation, in non-fraud cases, where Customs had actual knowledge

of a violation. Penalty Guidelines §(G). The court finds that there

are no mitigating factors present on the record before the court.

          The court grants Plaintiff’s Motion for Default Judgment

and awards Plaintiff the domestic value of the merchandise, in the

amount of $2,651,312.18 due to the presence of aggravating factors

and the absence of mitigating factors, plus post-judgment interest

as provided by law.   Plaintiff shall bear its own costs and fees.

                                       /s/ Nicholas Tsoucalas
                                          Nicholas Tsoucalas
                                             Senior Judge
Dated: September 28, 2015
       New York, New York