POGUE, Chief Judge:
In this action, Plaintiff Hartford Fire Insurance Company ("Hartford") seeks to void certain bonds securing entries of frozen cooked crawfish tailmeat from the People's Republic of China ("China"). In its Second Amended Complaint, ECF No. 88, Hartford alleges as its single cause of action that the Defendant, United States Customs and Border Protection ("Customs"), abused its discretion by either failing to require a cash deposit in lieu of a bond for the entries in question or rejecting the entries altogether. Customs moves, pursuant to USCIT Rule 12(b)(5), to dismiss the Second Amended Complaint for failure to state a claim. For the reasons explained below, Customs' motion to dismiss is GRANTED.
This action arises from Sunline Business Solution Corporation's ("Sunline") importation into the United States of eight entries of freshwater crawfish tailmeat, between July 30, 2003, and August 31, 2003 (the "Hubei entries"). Second Am. Compl., ECF No. 88 at ¶¶ 2-3. The entries were from Chinese producer Hubei Qianjiang Houho Frozen. The Hubei entries were subject to an antidumping ("AD") duty order covering freshwater crawfish tailmeat from China, Second Am. Compl. ¶ 4, and were entered following Customs' approval of eight single entry bonds designating Hartford as the surety. Second Am. Compl. ¶¶ 7-9. Customs liquidated the Hubei entries at the 223% country-wide AD rate for China, and, following Sunline's failure to pay the duties owed,
Hartford did not pay the demand and, instead, filed its original complaint in this action alleging that the bonds were voidable. According to Hartford, the bonds were voidable because Customs was investigating Sunline for possible violation of the import laws during the period in which the bonds were secured and the Hubei entries were entered, and Customs did not, at any time, inform Hartford about its investigation of Sunline. Second Am. Compl. ¶¶ 20-24.
Hartford's First Amended Complaint, ECF No. 29, alleged four causes of action: (1) material misrepresentation by Customs; (2) material misrepresentation by the importer; (3) impairment of suretyship; and (4) equitable subrogation or setoff. Customs moved to dismiss the First Amended Complaint in its entirety. Def.'s Mot. to Dismiss for Failure to State a Claim Upon Which Relief Can Be Granted, ECF No. 63.
The court granted Customs' Motion to Dismiss in Hartford I, holding that (1) the claim of material misrepresentation by Customs, premised on Customs failure to inform Hartford of a confidential investigation pending at the time the bonds in question were issued, was pre-empted by the Freedom of Information Act; (2) the claim of material misrepresentation by the importer did not contain sufficient facts to make the claim plausible; (3) the impairment of suretyship claim was barred on sovereign immunity grounds; and (4) the equitable subrogation or setoff claim failed because Customs possessed no funds to which Hartford could stake an equitable claim. See generally Hartford Fire I, ___ CIT ___, 857 F.Supp.2d 1356. The court dismissed the third and fourth causes of action with prejudice but permitted Hartford to amend its complaint to plead an alternative theory that Customs abused its discretion when it did not require the importer to post a cash deposit in lieu of a bond or reject the entries and to plead sufficient facts to make this claim of material misrepresentation plausible. Id.
In its Second Amended Complaint, Hartford alleges only this latter, remaining theory. It claims that given the existence of the Sunline investigation, Customs abused its discretion by accepting the bonds on the Hubei entries. Hartford alleges that due to the ongoing status of the investigation into Sunline, Customs had the discretion to and should have insisted on cash deposits in lieu of bonds, required additional security, or rejected the Hubei entries altogether. Hartford further alleges that because of the confidential nature of Customs' investigation, Customs should have known that Hartford was not aware of the existence of an investigation and therefore unreasonably increased Hartford's risk when it approved the Hubei bonds. Second Am. Compl. ¶¶ 50-52.
The court has jurisdiction pursuant to 28 U.S.C. § 1581(i).
When reviewing an agency decision for abuse of discretion, the court examines whether the decision "1) is clearly unreasonable, arbitrary, or fanciful; 2) is based on an erroneous conclusion of law; 3) rests on clearly erroneous fact findings; or 4) follows from a record that contains no evidence on which the [agency] could rationally base its decision." Sterling Fed. Sys., Inc. v. Goldin, 16 F.3d 1177, 1182 (Fed.Cir.1994) (quoting Gerritsen v. Shirai, 979 F.2d 1524, 1529 (Fed.Cir.1992)); see also Robert Bosch LLC v. Pylon Mfg. Corp., 659 F.3d 1142, 1147-48 (Fed.Cir. 2011) (noting that a clear error of judgment occurs when an action is "arbitrary, fanciful, or clearly unreasonable").
When deciding a motion to dismiss for failure to state a claim, the court "must
"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). To be plausible, the complaint need not show a probability of plaintiff's success, but it must evidence more than a mere possibility of a right to relief. Id. at 678, 129 S.Ct. 1937. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id.
Customs contends that under the prevailing scheme, it could not abuse its discretion because it had none. Citing the statute that was in effect when Hartford issued the Hubei bonds, 19 U.S.C. § 1675(a)(2)(B)(iii), Customs asserts that it had no authority to override a new shipper's decision to submit bonds rather than cash deposits, and therefore there was no discretion to abuse.
According to 19 U.S.C. § 1675(a)(2)(B)(iii), when a new shipper such as Hubei
19 U.S.C. § 1675(a)(2)(B)(iii).
Plaintiff concedes that the new shipper bonding privilege is an option that the shipper may elect. See Pl.'s Resp. to Def.'s Mot. Dismiss for Failure to State a Claim Upon Which Relief Can be Granted, ECF No. 101 at 7 ("Pl.'s Br."). However, it contends that 19 U.S.C. § 1623(a) empowers Customs to require additional security when circumstances establish that a bond is insufficient. 19 U.S.C. § 1623(a) states that when
19 U.S.C. § 1623(a). Hartford relies extensively on National Fisheries Institute, Inc. v. United States, ___ CIT ___, 637 F.Supp.2d 1270 (2009), for the proposition that Customs had the discretion to require additional bonding in addition to the new shipper bonding rate.
Rather, Customs correctly notes that it was in full compliance with the governing statutes and regulations when it accepted the bonds. It argues that its acceptance of the Sunline bonds was in accordance with the requirements laid out in 19 U.S.C. § 1675(a)(2)(B)(iii), 19 U.S.C. § 1623(e), and 19 C.F.R. § 113.40(a). Plaintiff, on the other hand, asserts that Customs' actions were unlawful because they were contrary to Customs' statutory mandate to "protect the revenue of the U.S." because they deprived the sureties of the opportunity to cancel what would prove to be risky bonds. However, this argument fails because Customs is directed to protect, among other things, the revenues of the United States, but not the revenues of the sureties. 19 U.S.C. § 1484(a)(2)(C). See Cam-Ful Indus., Inc. v. Fid. & Deposit Co., 922 F.2d 156, 162 (2d Cir.1991) ("[t]he policy behind surety bonds is not to protect a surety from its own laziness or poorly considered decision."). While the sureties' revenues are arguably a part of the revenues of the United States, in the same sense that every domestic industry's revenues must be, Plaintiff's reading of Customs' mandate is simply too broad.
Hartford further alleges that Customs abused its discretion when it approved the Hubei bonds because it was aware that Sunline was being investigated at the time. Hartford claims that Customs had begun its investigation into Sunline by August 15, 2003 and therefore was the sole party that knew of and was in a position to take preventative measures against Sunline's criminal activities "based on its knowledge of Sunline's contemporaneous bad acts involving the same class of merchandise from the same country of origin." Second Am. Compl. ¶¶ 16, 62. But Plaintiff fails to provide any basis for the court to plausibly infer abuse of discretion in Customs failure to take broader action in response to its investigation. See Iqbal, 556 U.S. at
Finally, Hartford argues at length that Customs abused its discretion when it did not reject the Hubei entries altogether because Customs had investigated and ultimately rejected another set of Sunline entries that preceded the Hubei entries without violating the confidential nature of the Sunline investigation. See Pl.'s Br. at 14; Second Am. Compl. ¶¶ 19-21. These entries are referred to as the "World Commerce" entries and were rejected when Customs concluded that Sunline had, with regard to those entries, falsified documents to reflect a different manufacturer. Id. This claim fails because the World Commerce entries suffered from a different flaw that was independent of, and not logically connected to, Sunline's default on the Hubei entries. Plaintiff's pleadings indicate no rational connection between the Hubei entries, Sunline, and the World Commerce entries other than conclusory allegations of the potential for violations. Plaintiff's pleadings do not even suggest how Customs' investigation of false documentation in one set of entries can plausibly lead to the conclusion that Sunline would default on the Hubei entries. Accordingly, Plaintiff has failed to plead facts that plausibly suggest a rational connection between the Sunline investigation, the false documentation in the World Commerce entries, and the eventual default on the Hubei entries. Therefore, there is no basis for the court to plausibly infer an abuse of discretion.
For the reasons stated above, Customs' motion to dismiss for failure to state a claim is GRANTED. Judgment will be entered accordingly.