United States v. Horizon Prods. Int'l, Inc. , 229 F. Supp. 3d 1370 ( 2017 )

Slip Op. 17-68
UNITED STATES COURT OF INTERNATIONAL TRADE
UNITED STATES,
Plaintiff,
Before: Leo M. Gordon, Judge
v.
Court No. 14-00104
HORIZON PRODUCTS INTERNATIONAL,
INC.,
Defendant.
OPINION
[Plaintiff’s Motion for Default Judgment granted.]
Dated: June 7, 2017
Daniel B. Volk, Trial Attorney, Commercial Litigation Branch, Civil Division,
U.S. Department of Justice of Washington, DC for Plaintiff United States. On the brief with
him were Chad A. Readler, Acting Assistant Attorney General, Jeanne E. Davidson,
Director, Claudia Burke, Assistant Director, and Eric J. Singley, Trial Attorney. Of counsel
on the brief was Claire J. Lemme, Attorney, Office of Associate Chief Counsel, U.S.
Customs and Border Protection of Miami, FL.
Peter S. Herrick, of Peter S. Herrick, P.A. of St. Petersburg, FL, and Josh Levy,
Marlow, Adler, Abrams, Newman & Lewis, P.A. of Coral Gables, FL for Defendant Horizon
Products International, Inc.
Gordon, Judge: Before the court is the motion of Plaintiff United States
(“the Government”), pursuant to USCIT Rule 55, for a default judgment against
Defendant Horizon Products International, Inc. (“Horizon”) for a civil penalty in the amount
of $324,540.00, plus post-judgment interest. Pl.’s Mot. for Default J., ECF No. 47 (“Pl.’s
Court No. 14-00104 Page 2
Mot.”). Defendant responded but did not challenge the Government’s request for a default
judgment and penalty. Def.’s Resp. to Pl.’s Mot. for Default J. at 1, ECF No. 48 “Def.’s
Resp.”). The court has jurisdiction pursuant to 28 U.S.C § 1582(1) (2012) for the recovery
of a civil penalty and duties under Section 592 of the Tariff Act of 1930, as amended,
19 U.S.C. § 1592 (2012) (“Section 592” or “§ 592”).1
For the reasons set forth below, the court grants Plaintiff's motion for default
judgment, and awards the United States a civil penalty of $162,270, plus post-judgment
interest.
I. Background
The United States commenced this action to collect a civil penalty assessed under
§ 592 for Defendant’s alleged negligent misclassification of certain entries of plywood and
for unpaid duties on those entries. The background of this litigation is summarized briefly
below and provided in detail in United States v. Horizon Prods. Int’l, Inc., 39 CIT ___,
82 F. Supp. 3d 1350 (2015) (“Horizon I”). The court presumes familiarity with the
underlying facts, administrative proceedings before U.S. Customs and Border Protection
(“Customs”), and the procedural history of this action.
From April 2006 through August 2007, Horizon entered or attempted to enter
64 entries of various types of imported plywood into the United States under certain duty-
free provisions of the Harmonized Tariff Schedule of the United States (“HTSUS”),
1
Further citations to the Tariff Act of 1930, as amended, are to the relevant provisions
of Title 19 of the U.S. Code, 2012 edition.
Court No. 14-00104 Page 3
i.e., HTSUS subheadings 4412.29.56, 4412.94.10, or 4412.99.51. The majority of
Horizon’s imported plywood contained at least one outer ply of non-coniferous wood other
than birch, Spanish cedar, or walnut (“non-coniferous plywood”), with the remainder
containing an outer ply of sapele, a tropical wood (“sapele plywood”). Subsequent to
importation Customs determined that Defendant should have classified the non-coniferous
plywood under either HTSUS subheading 4412.14.31 (2006) or 4412.32.31 (2007), and
the sapele plywood under HTSUS subheading 4412.13.40 (2006) or 4412.31.40 (2007),
all with an applicable 8% duty rate.
Customs then rate-advanced (liquidated at a higher rate) 21 of Horizon’s entries
because of the misclassification. Horizon paid $42,016, representing the full rate-
advanced 8% duty on those entries. Customs liquidated the remaining 43 entries at the
inapplicable duty-free rate. Pl.’s Mot. for Summ. J., App. at A1-8, ECF No. 14-2
(“Pl’s Summ. J., App.”).
At the conclusion of the underlying administrative pre-penalty and penalty process,
Customs identified a $162,270 total revenue loss, consisting of $42,016 in potential
revenue loss relating to the rate-advanced entries and $120,254 actual revenue loss
relating to the entries liquidated at the inapplicable duty-free rate. Customs eventually
demanded payment of $120,254 in outstanding duties and a $324,540 penalty, an amount
equal to twice the $162,270 total lost revenue. Customs recovered $50,000 from
Defendant’s surety, leaving $70,254 in unpaid duties. Id. at A5-13.
Court No. 14-00104 Page 4
Horizon sought mitigation of the penalty before Customs, arguing it did not have the
means to pay, and provided supporting documentation, including financial statements and
tax filings. Def.’s Non-Confid. App. at Hor. 1-84, ECF No. 31-1. Customs agreed that
Horizon could not pay the full amount, but determined that Horizon had sufficient equity to
pay up to $200,000 combined duties and penalty. Thereafter, Customs mitigated the
penalty to $85,278 conditioned on full payment of the duties owed within 60 days. Id. at
Hor. 85-89. Defendant countered with alternate terms, but the parties’ negotiations yielded
no resolution. Subsequently, Customs demanded the $70,254 in outstanding duties and
the full penalty amount of $324,450. Id. at Hor. 124. When Defendant failed to pay, Plaintiff
commenced this action.
Defendant previously conceded that it misclassified the subject merchandise and
was liable for the unpaid duties. Horizon I, 39 CIT at ___, 82 F. Supp. 3d at 1355.
Thereafter, the court entered a USCIT Rule 54(b) partial judgment for $70,254 for those
unpaid duties.2 J., ECF No. 37. However, the court determined that genuine issues of
material fact remained for resolution after a trial regarding whether Defendant exercised
reasonable care in the entry of the subject merchandise, Horizon I, 39 CIT at ___,
82 F. Supp. 3d at 1357-58, and the “appropriate penalty, if any, to be assessed . . .,” id.,
39 CIT at ___, 82 F. Supp. 3d at 1360.
The parties then sought, and the court provided time for supplemental discovery
and pre-trial preparation. Order, Sept. 11, 2015, ECF No. 38 (order governing
2
As of this date, Horizon has not satisfied any portion of the partial judgment.
Court No. 14-00104 Page 5
supplemental discovery and requirements for preparation for trial) (“September 11th
Order”). Horizon did not follow through with the agreed upon supplemental discovery
plan and did not comply with its pre-trial obligations. Ultimately, Horizon decided that it
did not wish to proceed to trial and advised Plaintiff and the court that it would no longer
defend itself in this action. Pl.’s Req. for Trial, ECF No. 40 (“Defendant does not concur
with the Government’s request for trial. Defendant does not wish to proceed to a trial.”);
Def.’s Mot. for Protective Order at 1, ECF No. 41; Pl.’s Resp. to Def.’s Mot. for Protective
Order at 2, ECF No. 42; Def.’s Resp. to Pl.’s for Default J. at 3, ECF No. 48.
II. Legal Framework
Section 592 governs the assessment of a civil penalty for the entry of imported
merchandise into the United States due to negligence. 19 U.S.C. § 1592. Section 592(a)(1)
provides that “no person, by . . . negligence[,] . . . may enter, introduce, or attempt to enter
or introduce any 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.” 19 U.S.C. § 1592(a)(1). As for materiality, [a] document,
statement, act, or omission is material if it has the natural tendency to influence or is
capable of influencing . . . . [Customs’] determination of an importer’s liability for duty . . . .”
19 C.F.R. Pt. 171, App. B(B) (2009).
Under § 592, where a violator is culpable for negligence and duty assessment is
affected, the maximum penalty is the lesser of “(i) the domestic value of the [subject]
merchandise, or (ii) two times the lawful duties, taxes, and fees of which the United States
Court No. 14-00104 Page 6
is, or may be deprived.” 19 U.S.C. § 1592(c)(3). Additionally, the United States may
recover any unpaid lawful duties regardless of whether a monetary penalty is assessed.
Id. § 1592(d).
When a civil penalty is sought on the basis of negligence, the burden of proof is
initially on the United States “to establish the act or omission constituting the violation.” Id.
§ 1592(e)(4). The burden then shifts to the alleged violator to prove that “the act or
omission did not occur as a result of negligence.” Id. Accordingly, the alleged violator must
“affirmatively demonstrate that it exercised reasonable care under the circumstances.”
United States v. Ford Motor Co., 463 F.3d 1267, 1279 (Fed. Cir. 2009).3
III. Discussion
USCIT Rule 55 provides a two-step process for obtaining judgment when a party
fails to plead or otherwise defend. See USCIT R. 55(a), (b); see also 10A C. Wright &
A. Miller, Federal Practice & Procedure § 2682 (4th ed. 2017). The first step in that
process is the entry of a default, see USCIT R. 55(a), followed by a motion for entry of a
default judgment, see USCIT R. 55(b).
After Horizon’s notifications that it no longer intended to go to trial or otherwise
defend this action, the court, on its own initiative, satisfied step one of the Rule 55 process
by ordering entry of default against Defendant. United States v. Horizon Prods. Int’l, Inc.,
3
The general parameters of what constitutes reasonable care are set forth in 19 C.F.R.
Part 171, App. B(D)(6). See also H. Rep. No. 103–361 at 120 (1993), reprinted in 1993
U.S.C.C.A.N. 2552, 2670 (identifying possible methods by which one may show
reasonable care).
Court No. 14-00104 Page 7
40 CIT ___, 190 F.Supp.3d 1155 (2016). The court entered the default because Plaintiff
failed to do so before filing its motion for default judgment. Id., 40 CIT at ___, 190 F. Supp.
3d at 1156.
The mere fact that a defendant is in default does not entitle a plaintiff to a default
judgment as a matter of right. See City of New York v. Adventure Outdoors, Inc.,
644 F. Supp. 2d 201, 212 (E.D.N.Y. 2009). Therefore, determining whether to grant a
motion for default judgment lies within the sound discretion of the court. Id. In exercising
its discretion, the court considers, among other factors, whether (1) denial of the motion
will prejudice plaintiff; (2) defendant has a meritorious defense; and (3) defendant’s
culpable conduct contributed to the default. See Eastern Elec. Corp. v. Shoemaker
Const. Co., 657 F.Supp. 2d 545, 551 (E.D. Penn. 2009) (quotation omitted). Additionally,
when a defaulting party has appeared, as in this case, the court will examine whether the
claimant has served the defaulting party with written notice of the motion for default
judgment. USCIT R. 55(b).
Here, given Horizon’s actions, including its unwillingness to appear for trial, denial
of the motion for default judgment would prejudice Plaintiff by leaving it with no effective
remedy for Defendant’s violation of § 592. As to the second factor, the record before the
court demonstrates that Horizon had an opportunity to present testimony and evidence in
support of its affirmative defense of reasonable care, but ultimately chose not to do so.
Third, Defendant’s conduct reflects a conscious disregard of the court’s
September 11th Order and an unwillingness to move forward with this litigation in any
Court No. 14-00104 Page 8
meaningful way. Lastly, the docket shows that that Horizon was served and is on notice
that the court may enter judgment on Plaintiff’s motion. See Def.’s Resp. Accordingly, it is
appropriate for the court to grant Plaintiff’s motion and enter a default judgment against
Horizon.
Having decided that a default judgment is proper, the court turns to the issues of
liability and damages (the amount of the penalty). The entry of a default generally has the
effect of establishing liability on the part of the defaulting party. See Nishimatu Constr.
Co. v. Houston Nat’l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975). While the factual basis
for liability is established by the default, the default does not serve as an admission of the
claim of liability. Id. Similarly, a party’s failure to defend does not operate as an admission
as to the amount of damages claimed in the complaint. See Cement & Concrete Workers
Dist. Council Welfare Fund v. Metro Found. Contractors Inc., 699 F.3d 230, 234 (2d Cir.
2012).
Normally, the court will determine whether the well-pled facts of the complaint,
taken as true, are sufficient to permit the entry of judgment on Plaintiff’s claim as a matter
of law. See City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 137 (2d Cir.
2011) (citation omitted). However, given the posture of this action (one in which Horizon
appeared and participated in much of the life of the litigation, but, at a late stage, ceased
its participation), the court considers the entirety of the record in determining the
sufficiency of the liability claim. See USCIT R. 55(b).
Court No. 14-00104 Page 9
As noted previously, Horizon conceded that it misclassified the subject entries of
plywood. See Horizon I. In denying Plaintiff’s motion for summary judgment in part, the
court found that Horizon’s entry documents contained material false written statements
“that altered Customs’ assessment of Horizon’s liability for duties.” Horizon I, 39 CIT at
___, 82 F. Supp. 3d at 1356. The court, however, stopped short of concluding that Horizon
acted negligently, as a matter of law, in violation of § 592(a). The court stated that an open
question existed as to whether Horizon exercised reasonable care in making the subject
entries, which, if proven, would defeat the Government’s claim of negligence. Id., 39 CIT
at ___, 82 F. Supp. 3d at 1357-58. Despite having an opportunity to prove that it acted
with reasonable care, Defendant failed to proffer any evidence to support its affirmative
defense. Accordingly, the court now holds that, as a matter of law, Defendant negligently
misclassified the subject entries of plywood in violation of § 592.
Turning to damages, Rule 55 contemplates that the defaulting party is entitled to
contest damages and may participate in a hearing, if one is held, before the entry of a
default judgment. USCIT R. 55(b). Horizon does not dispute Plaintiff’s claim for damages.
Def.’s Resp. at 1 (“Horizon does not respond for the purpose of challenging the
Government’s request for a default judgment and penalty.”). As a result, there is no need
for an evidentiary hearing to receive testimony and documents for the purposes of
determining the appropriate penalty as Defendant knowingly and willfully ceased its
participation in the litigation, including not asking for a hearing on the amount of the
proposed penalty. See, e.g., Finkel v. Romanowicz, 577 F.3d 79, 87 (2d Cir. 2009)
Court No. 14-00104 Page 10
(hearing not required when no disputed issues of fact and defaulting party failed to request
hearing). Rather, the court will “hear” from the parties via declaration(s) and other
documents on the record to determine if there is a basis for an award of damages.
Entrepreneur Media, Inc. v. JMD Entm’t Grp., LLC, 958 F. Supp. 2d 588, 593 (D. Md.
2013) (citing 10A C. Wright & A. Miller, Federal Practice & Procedure § 2688).
Here, the Government seeks the statutory maximum penalty of two times the lawful
duties, $324,540, which is less than the domestic value of the subject merchandise, which
exceeded $2 million. Pl.’s Mot. for Default J., App. at 13-14, ¶ 8, ECF No. 14-2 (“Pl.’s Mot.
for Default J., App.”) (Declaration of Jose Sacerio); Compl. Ex. A at 3, ECF No. 3-1.
Although it may request the statutory maximum, the Government is not entitled, as a matter
of right, to a penalty in that amount. Rather, the court must exercise its discretion to
determine an appropriate penalty amount. 19 U.S.C. § 1592(e)(1); United States v.
Nat'l Semiconductor Corp., 547 F.3d 1364, 1368-69 (Fed. Cir. 2008) (citing Ford Motor
Co., 463 F.3d at 1285); United States v. Int’l Trading Servs., LLC, Slip Op. 17-55, 41 CIT
____, 2017 WL 1957548, at 4-7 (May 5, 2017).
In arguing for the statutory maximum penalty, the Government, without analysis,
presumes applicability of the 14-factor test set forth in United States v. Complex Mach.
Works Co., 23 CIT 942, 83 F. Supp. 2d 1307 (1999) (“Complex Machine”).4 In civil penalty
4
The Complex Machine factors are: (1) the defendant’s good faith effort to comply with
the statute; (2) the defendant’s degree of culpability; (3) the defendant’s history of
previous violations; (4) the nature of the public interest in ensuring (footnote continued)
Court No. 14-00104 Page 11
actions involving litigation on the merits, the court has consistently applied Complex
Machine to arrive at the amount of the penalty. See, e.g., United States v. Nat’l
Semiconductor Corp., 30 CIT 769 (2006) (trial on negligence claim), reconsideration
denied, 30 CIT 1429 (2006), aff’d, 547 F.3d 1364 (Fed. Cir. 2008); United States v.
Matthews, 31 CIT 2075, 533 F.2d 1307 (2007) (summary judgment on negligence claim).
In each of those cases, the parties had an opportunity to make a full and complete record
on the substantive claims and present evidence on mitigating or aggravating
considerations that affect the determination of the penalty. That scenario is not present in
this case.
In a typical default judgment situation—one in which a defendant has not answered
the complaint or otherwise appeared to defend—the court does not have a fully developed
record on the merits. In these circumstances, the court has taken differing approaches in
determining the amount of the penalty. In some circumstances, the court has not applied
the Complex Machine factors, but simply verified the penalty amount claimed against a
well-pled complaint, and any affidavits or supporting documentation, and entered a default
compliance with the regulations involved; (5) the nature and circumstances of the violation
at issue; (6) the gravity of the violation; (7) the defendant’s ability to pay; (8) the
appropriateness of the size of the penalty to the defendant's business and the effect of a
penalty on the defendant's ability to continue (footnote continued) doing business; (9) that
the penalty not otherwise be shocking to the conscience of the [c]ourt; (10) the economic
benefit gained by the defendant through the violation; (11) the degree of harm to the
public; (12) the value of vindicating the agency authority; (13) whether the party sought
to be protected by the statute had been adequately compensated for the harm; and (14)
such other matters as justice may require. Complex Machine, 23 CIT at 949-50, 83 F.
Supp. 2d at 1315 (footnote omitted).
Court No. 14-00104 Page 12
judgment in that amount. See, e.g., United States v. NYCC 1959 Inc., 40 CIT ___,
182 F. Supp. 3d 1346 (2016) (negligence claim) (absence of equitable considerations to
support lessening penalty below statutory cap).
In other cases, the court has done more than just verify the penalty claimed. It has
weighed mitigating or aggravating considerations in determining an award of a § 592
penalty. There, the court appears to be acting on the basis of the existence of some
evidence as to those considerations, relying, to some degree, on Complex Machine in
certain instances, and not at all in others. See, e.g., Int’l Trading Servs., 41 CIT at ____,
2017 WL 1957548, at 4-7 (consideration of Complex Machine factors); United States v.
New-Form Mfg. Co., 27 CIT 905, 919-25, 277 F. Supp. 2d 1313, 1327-32 (2007)
(consideration of Complex Machine factors); United States v. Jean Roberts of Calif., Inc.,
30 CIT 2027, 2039-40, 2006 WL 3775970, at *10 (2006) (relying on both Complex Machine
and 19 C.F.R. Pt. 171, App. B(E)-(H) for mitigating factors); United States v. Inner Beauty
Int’l (USA) Ltd., Slip Op. 11-148, 35 CIT ___, 2011 WL 6009239 (Dec. 2, 2011) (relying on
19 C.F.R. Pt. 171, App. B for assessing penalty)
This action does not fall at either end of the spectrum. It was not fully litigated, as
initially contemplated, with the resulting application of the 14-factor test of Complex
Machine. See Horizon I, 39 CIT at ___ - ___, 82 F. Supp. 3d at 1359. Neither is it
representative of the typical circumstance involving the entry of default and a motion for
default judgment. Horizon did answer the complaint and did, for a period of time, defend
this action. A modest, but not a full, record exists, upon which the court may rely in
Court No. 14-00104 Page 13
determining the appropriate penalty. Given these circumstances, the court declines to
simply verify the penalty sought and enter a judgment in favor of the Government. Nor will
it automatically apply the totality of Complex Machine as urged by the Government. Rather,
the court will derive the appropriate amount of penalty after weighing any applicable
mitigating or aggravating considerations in this particular case. See Int’l Trading Servs.,
41 CIT at ____, 2017 WL 1957548, at 5 (penalty determined “in light of totality of evidence
supporting a higher or lower penalty”).
The Government predicates much of its claim for the maximum penalty on
deterrence—focusing principally on considerations regarding Defendant’s character, the
seriousness of the violation, and Horizon’s dilatory conduct. As to character, the
Government argues that Defendant failed to make a good faith effort to comply with the
customs laws in that some of Horizon’s misclassifications contradicted the information
shown on its invoices. Pl.’s Mot. for Summ. J. at 9. Specifically, Plaintiff maintains that
Horizon classified several of its plywood entries as having an outer ply of birch, even
though the associated invoices expressly identified other species of wood. Pl.’s Mot. for
Summ. J., App. (Remainder) at A530, A541, A548, A565, A571, A594, A613, A623, ECF
No. 27-1. For other entries, the Government contends that Horizon used a duty-free “other”
classification, rather than selecting the correct classification. Pl.’s Mot. for Summ. J. at 8.
Plaintiff also maintains that even after Customs advised Horizon of the correct
classification in a May 30, 2007 notice of action, Pl.’s Mot. for Summ. J., App. at A1,
Horizon continued to misclassify its merchandise as duty-free for entries stretching into
Court No. 14-00104 Page 14
August 2007. Compl. Ex. A at 3 (entries dated July 2, 2007, July 17, 2007, August 1, 2007,
and August 7, 2007). In response, Horizon offered the declaration of one of its co-owners
indicating that it made the subject entries using an authorized customs broker, with the
implication being that Horizon exercised reasonable care. See Def.’s Resp., Decl. of
Kelsey Quintana ¶ 4, 5. Ultimately, Horizon conceded that it misclassified the subject
entries and was liable for the unpaid duties. Horizon I, 39 CIT at ___, 82 F. Supp. 3d at
1355.
Problematically for Defendant, however, there is no evidence (other than the above-
referenced self-serving declaration) before the court as to any steps taken by Horizon, on
its own or by a customs broker acting on Horizon’s behalf, to ascertain the correct
classification of the imported plywood either before or after notification from Customs.
Additionally, Horizon failed to demonstrate that it made a good faith effort to assert the
correct classification in entering the subject merchandise. As a result, the record lacks any
evidence to suggest a reason for Horizon’s actions other than an unlawful effort to obtain
a duty-free rate for its entries. Accordingly, Horizon is not entitled to mitigation as it has
failed to show any “extraordinary cooperation beyond that expected from a person under
investigation for a Customs violation.” United States v. Optrex Am., Inc., 32 CIT 620, 640,
560 F. Supp. 2d 1326, 1343 (2008).
As to the gravity of Defendant’s violation, the court examines, among other things,
whether Horizon’s actions were isolated occurrences or presented a pattern of disregard
for the customs laws of the United States. See United States v. New-Form Mfg. Co.,
Court No. 14-00104 Page 15
27 CIT 905, 921-22, 277 F. Supp. 2d 1313, 1328-29 (2003) (quoting Complex Machine,
83 F. Supp. 2d at 1316-17). It is undisputed that Horizon’s misclassifications
encompassed 64 entries spanning more than one year, and continued even after
Customs notified Horizon of the correct classification. The record also demonstrates
that Horizon disregarded information on the face of the invoices that contradicted its
description of the imported merchandise on the subject entries. Despite these facts,
Horizon offers little to no evidence to explain the basis for its claimed classification.
Horizon’s actions do not diminish the gravity of its violation, and consequently, do not
provide a basis for mitigation of the penalty amount claimed by the Government.
In seeking the maximum penalty, the Government places great emphasis on
Defendant’s dilatory conduct throughout the underlying administrative process but also
in this litigation. The Government contends that it has expended substantial resources
to enforce the law in this case, and that Horizon has engaged in a pattern of delay,
uncooperative conduct, and meritless contentions.
As to the administrative proceeding, Plaintiff contends that Horizon had 30 days
to submit a written petition to respond to Customs’ pre-penalty notice, Pl.’s Mot. for
Summ. J., App. at A5, and that Horizon waited until the deadline date to request a 60-
day extension to submit its petition, Pl.’s Mot. for Default J. at 9. Simultaneously, Horizon
notified Customs of its intent not to waive the statute of limitations. Pl.’s Mot. for Default
J., App. at 1. After denying Defendant’s extension request, id. at 4, Customs issued a
penalty notice to Horizon. Pl.’s Mot. for Summ. J., App. at A13. Two months later, when
Court No. 14-00104 Page 16
Customs followed up with a demand letter, Pl.’s Mot. for Default J., App. at 5, Horizon
maintained that Customs had not “personally served” it, and therefore no legal action
could be taken against it, id. at 6. In response, Customs noted that it had a copy of
Horizon’s signed return receipt for the pre-penalty notice, to which Horizon renewed its
request for an extension to file a petition. Id. at 9. Subsequently, Horizon submitted a
petition that Customs accepted for review. The administrative process continued for
approximately three years, ending in late 2012.
Horizon was definitely slow-playing the Government, and its behavior was not
optimal or to be emulated. A significant penalty for this behavior is warranted.
Problematically, however, in seeking the maximum penalty the Government has also
lumped in as an additional justification Horizon’s behavior before the court. The
Government focuses on Horizon’s failure to “cooperate in discovery” and “deciding not
to participate in a pretrial schedule [that Defendant] jointly proposed.” Pl.’s Mot. for
Default J. at 9. In particular, the Government contends that Horizon’s conduct throughout
this litigation—whether by failing to cooperate in discovery or by changing its mind and
deciding not to participate in a pretrial schedule it had jointly proposed—has further
exhausted Government resources unnecessarily. See Pl.’s Opp’n to Def. Mot. to File
an Amended Scheduling Order Out-Of-Time, ECF No. 16; Def.’s. Mot. for a Protective
Order; Pl.’s Notice of Filing Proposed Pretrial Order, ECF No. 43.
Although the court is sympathetic with the Government’s arguments about
Horizon’s uncooperative and dilatory behavior before the court, a civil penalty under § 592
Court No. 14-00104 Page 17
is not the remedy for contumacious behavior, dilatory tactics, or a lack of cooperation on
the part of a litigant in an action under 28 U.S.C. § 1582. Rather, the Government’s
remedy for this conduct lies within other provisions of the USCIT Rules, like Rule 11,
Rule 16(f) (sanctions), or Rule 37(b) (failure to comply with discovery order). The
Government chose not to avail itself of these remedies. The court is reluctant to address
questionable litigation behavior governed by specific rules through a statutory penalty
provision designed to promote compliance before an administrative agency, Customs.
With that said, the court notes that the public interest here does favor a significant
penalty. There is a strong public interest in “the truthful and accurate submission of
documentation to Customs and the full and timely payment of duties required on
imported merchandise. These are weighty interests, contravention of which
necessitates the imposition of a penalty of some substance.” Complex Mach. Works
Co., 39 CIT at ____, 83 F. Supp. 2d 1317. Horizon not only harmed the public fisc by
failing to remit undisputed duties, but gained an economic benefit through its actions.
Horizon’s actions run contrary to the public interest.
IV. Conclusion
All told, the above considerations favor deterrence and a significant penalty. The
court though does not believe that the Government has justified imposition of the statutory
maximum because, as explained above, the Government seeks in part to apply the
statutory § 592 penalty to also remedy litigation behavior that is governed by other more
specific Court Rules. Here, rather than the statutory maximum, the court believes that a
Court No. 14-00104 Page 18
civil penalty in the amount of $162,2705, plus interest from the date of judgment until it is
paid, is appropriate. Judgment will enter accordingly.
/s/ Leo M. Gordon
Judge Leo M. Gordon
Dated: June 7, 2017
New York, New York
5
This is equal to the amount of the total lost revenue identified by Customs in the pre-
penalty and penalty notices. It is in addition to $70,254 in unpaid duties for which the
court previously issued a partial judgment. See J., ECF No. 37.