MARY A. McLAUGHLIN, District Judge.
The plaintiff, Customs Fraud Investigations, LLC ("CFI") brings this action against the defendant, Victaulic Company ("Victaulic"), to recover damages and civil penalties on behalf of the United States as a qui tam relator pursuant to the False Claims Act, 31 U.S.C. §§ 3729, et seq. ("FCA"). Victaulic is a producer of iron and steel pipe fittings manufactured in the United States, China, Poland, and Mexico. CFI is a company that conducts research and analysis related to potential customs fraud. CFI alleges that Victaulic has violated the FCA by failing to mark or mismarking its foreign-made pipe fittings as required under the United States Tariff Act of 1930 ("Tariff Act"), 19 U.S.C. §§ 1304(a) and (c), and by falsifying customs entry documents, to avoid an obligation to pay "marking duties" due on mismarked or unmarked foreign products under 19 U.S.C. § 1304(i).
CFI filed its one-count complaint in this Court on May 30, 2013. On August 7, 2013, the United States declined to intervene or enter its appearance in the case, and the complaint was unsealed. Victaulic has moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(1), on the grounds that § 3730(e)(4)(A) of the FCA requires dismissal of a private enforcement action based on publicly disclosed allegations or transactions of fraud.
Victaulic has also moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6), on the grounds that (1) the failure to mark goods or to pay marking duties under the Tariff Act does not give rise to a claim under the FCA; and (2) even if these actions do give rise to a claim under the FCA, CFI has failed to state a claim for such a violation under either Rule 8(a) or Rule 9(b) of the Federal Rules of Civil Procedure.
Because the Court finds that CFI has failed to allege facts sufficient to support its allegations that Victaulic failed to mark its imported pipe fittings, or knowingly concealed or avoided any obligation to pay marking duties, the complaint will be dismissed with prejudice.
The Tariff Act requires that, with some exceptions, "every article of foreign origin . . . imported into the United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article . . . will permit in such manner as to indicate to an ultimate purchaser in the United States the English name of the country of origin of the article." 19 U.S.C. § 1304(a).
The Act further provides that, with few exceptions, ". . . pipes of iron, steel, or stainless steel, to pipe fittings of steel, stainless steel, chrome-moly steel, or cast and malleable iron . . . shall be marked with the English name of the country of origin by means of die stamping, cast-in-mold lettering, etching, engraving, or continuous paint stenciling." 19 U.S.C. § 1304(c)(1). Because imported pipe fittings should bear country-of-origin markings that conform to one of the five methods listed above, unmarked pipe fittings are generally presumed in the industry to be U.S.—made. Woodings Decl. ¶ 45 (Doc. No. 18-1).
If imported goods are not marked with the country of origin in the prescribed manner, additional payments known as "marking duties" may be due under 19 U.S.C. § 1304(i), which states:
19 U.S.C. § 1304(i).
Despite the statutory language directing that marking duties "shall be deemed to have accrued at the time of importation, shall not be construed to be penal, and shall not be remitted wholly or in part nor shall payment thereof be avoidable for any cause," it is not clear at precisely what point in time marking duties become due and owing. At the motion hearing, the parties agreed that marking duties are not necessarily due at the time the unmarked foreign goods cross into the United States; instead, such duties become due if the goods are not subsequently marked, immediately exported, or destroyed. Hr'g Tr. 17-18,23, 25-27. The parties also agreed that if the marking failure is discovered by the United States Bureau of Customs and Border Protection ("CBP") before the goods leave the custody of CBP, marking duties cannot be paid in lieu of properly marking the goods; instead, marking duties generally are levied if the goods leave CBP custody unmarked, and the marking failure is discovered after the fact. Hr'g Tr. 17-18, 23, 25-27; Woodings Decl. ¶ 47.
The allegations in the complaint itself are limited and conclusory. CFI alleges generally that Victaulic has knowingly failed to mark its imported pipe fittings with country-of-origin markings, in violation of the Tariff Act. CFI also alleges that Victaulic has knowingly concealed the true origin of its pipe fittings, and falsified customs entry documents, both to avoid paying customs marking duties and so that it can pass off its foreign pipe fittings as U.S.—made, to command the higher price generally paid for domestic-made pipe fittings. Compl. ¶ 45.
Consequently, CFI alleges, Victaulic "routinely made or used, or caused to be made or used, false and fraudulent records and statements material to Victaulic's obligation to pay marking duties to the U.S. Government, an obligation that Victaulic further knowingly concealed and knowingly and improperly avoided or decreased, in violation of the FCA, 42 U.S.C. § 3729(a)(l)(G)." Compl. ¶ 28.
In support of these claims, CFI explains that its analysis of shipping manifests shows that Victaulic has imported approximately eighty-three million pounds of pipe fittings from foreign sources between 2003-2012, and "upon information and belief," CFI alleges these imports account for a "significant majority" of Victaulic's annual sales in the United States. Compl. ¶ 23. CFI also asserts that "almost all" of Victaulic's pipe fittings available for sale in the U.S. bear either no country-of-origin marking, or are marked "Made in the U.S.A." Compl. ¶ 25. CFI therefore concludes that Victaulic has knowingly failed to mark or has mismarked its imported pipe fittings, and has falsified its customs entry documents to avoid paying marking duties.
In its briefing in opposition to Victaulic's motion to dismiss, CFI provides further detail as to how it reached its conclusions regarding the quantity of pipe fittings imported during the relevant time period, the percentage of Victaulic's annual U.S. sales that consist of imported pipe fittings, and its determination that only a "miniscule fraction" of Victaulic's pipe fittings sold in the U.S. bear foreign markings.
First, CFI examined shipping manifests from 2003-2012 using a paid subscriber database called Zepol. Zepol collects and makes available to its subscribers the shipping manifest and import information collected by CBP. CFI's "Import Analysis" showed that, since 2003, Victaulic has imported approximately eighty-three million pounds of pipe fittings from China and Poland by ship.
After calculating Victaulic's average annual imports for the years 2010-2012, reviewing Victaulic's pricing lists, and accounting for standard industry discounts, CFI calculated that the average price of these imported pipe fittings was $10.00 to $15.00 per pound. CFI calls this portion of its analysis its "retail price cross-check." Based on this average price per pound, CFI concluded that the sales value of Victaulic's imports from China and Poland in 2011 was approximately $152 million.
CFI concedes that, because Victaulic is a privately held company, CFI has not been able to find any information from Victaulic itself regarding its annual U.S. or global sales. CFI alleges that other unidentified sources suggest that Victaulic's annual U.S. sales are somewhere between $250 million and $281.1 million. Woodings Decl. ¶ 27. Therefore CFI concludes that, based on an average price of $10.00 per pound, imported pipe fittings could have accounted for fifty-four to sixty-one percent of Victaulic's 2011 U.S. sales. Assuming a higher average price of $15.00 per pound, imported pipe fittings could have accounted for eighty-two to ninety-one percent of U.S. sales.
From August and September 2012, and from November 2012 to February 2013, CFI tracked advertisements for pipe fittings for secondary sale (i.e., for resale, not for sale by Victaulic itself) on the internet auction and sale site eBay ("CFI's Product Study"). Ms. Woodings's declaration explains CFI's efforts to control for incorrectly listed products, second-hand products, older products, and provides various reasons why eBay should be considered a valid source of secondary U.S. sales information in the pipe-fitting industry. Woodings Decl. ¶¶ 31-39.
Ultimately, CFI selected for further examination 221 eBay listings from approximately eighty-one sellers describing their products as new Victaulic pipe fittings. Woodings Decl. ¶¶ 40-41 & Ex. H. CFI did not examine any listings that were not accompanied by photographs, because CFI used the photographs provided by the sellers to determine whether and how the products were marked.
Of the 221 listings selected, CFI determined that twenty-four products were marked, labeled, or described by the seller as having been made in the United States. Of the listings that were unclear as to markings, or where markings could not be seen clearly in photographs, CFI selected approximately nine pipe fittings to purchase for physical examination. Of those purchases, three pipe fittings were marked as having been made in China, four were marked as made in the United States, and two were unmarked. Of the pipe fittings marked as made in China, one was properly marked with a cast-in-mold marking, but the other two were stenciled in ways that CFI asserts do not conform to Tariff Act requirements for marking pipe fittings. Woodings Decl. ¶¶ 41-43. The remaining eBay listings examined by CFI online are described as: "Product description and photos examined; no country of origin markings evident." Woodings Decl., Ex. H.
Based on these 221 listings, CFI alleges that at least seventy-five percent of the Victaulic pipe fittings available on eBay are unmarked. CFI also alleges that the fact that only three products were marked as having been made in China, and only one of those markings was compliant with Tariff Act requirements, "strongly suggests that Victaulic is engaging in an intentional practice of leaving its foreign-made pipe fittings unmarked." Woodings Decl. ¶ 45.
CFI further alleges that it "has reason to believe that Victaulic has been falsifying its entry documents and otherwise misrepresenting to CBP that no marking duties are owed on these imports," "[b]ased on CFI's knowledge and expertise regarding CBP's operations." Woodings Decl. ¶ 46. Namely, because CBP "physically inspects only a tiny fraction of shipments arriving in the United States" and "importers normally pay marking duties only if CBP detects a marking violation after [thirty days after entry]," CFI concludes that "it is highly unlikely that Victaulic imported and introduced into U.S. commerce the quantities of unmarked foreign goods found by CFI by truthfully representing and paying the amount or marking duties owed." Woodings Decl. ¶¶ 47-48.
At the time of importation of foreign merchandise, an importer is required to file various entry documents with CBP, which enable CBP to "determine whether the merchandise can be released from the custody of [CBP];" to "properly assess duties on the merchandise;" and to "determine whether any other applicable requirement of law . . . is met." 19 U.S.C. §§ 1484(a)(l)(A), (a)(1)(B)(i), (a)(1)(B)(iii). Entry documents typically include descriptions and value of the products imported, country of origin, and other information which would affect the duty or tariff charged at importation.
In its complaint, CFI alleges that "Victaulic is able to successfully (albeit unlawfully) import its unmarked pipe fittings into the United States by knowingly failing to pay or disclose to CBP the marking duties the company owes as a result of importing unmarked or improperly marked foreign goods. Victaulic commits this fraud on the U.S. Government by, among other things, falsifying its entry documents and otherwise concealing the foreign source of its pipe fittings such that CBP will not detect the company's fraud." Compl. ¶ 26.
At the hearing, CFI explained this allegation in further detail. Specifically, CFI asserts that Victaulic has falsified customs entry summary form 7501, which requires an importer or consignee to report in several places any and all duties, tariffs, or other fees that may be required by law. Compl. ¶ 20; Hr'g Tr. 28, 58-59. For example, the instructions for Column 29 of Form 7501 direct the importer to "identify any other fee, charge or exaction that applies. Examples include the beef fee, honey fee, pork fee, cotton fee, harbor maintenance fee (HMF), sugar fee, and merchandise processing fee (MPF)." CBP Form 7501 Instructions at 16. For Block 34, the instructions direct the importer to "[r]ecord the estimated duty, AD/CVD [Anti-dumping/Countervailing Duty], I.R. tax, and any other fees or charges calculated . . . ."
CFI argues that phrases such as "estimated duty" and "any other fees or charges" in the instructions require an importer to report not only the listed fees, but also, if applicable, the ten percent marking duties for improperly marked products. On information and belief, CFI alleges that Victaulic has not reported on these customs entry forms that it owes marking duties, and has therefore misrepresented, omitted, or avoided its marking duties, in violation of the False Claims Act.
Victaulic has moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction, because § 3730(e)(4)(A) of the FCA — a subsection known as the "public disclosure bar" — requires dismissal of an action if substantially the same allegations or transactions as alleged by the qui tam relator were publicly disclosed, unless the relator is an "original source" of the information.
The public disclosure bar of the FCA "`[s]eek[s] the golden mean between adequate incentives for whistle-blowing insiders with genuinely valuable information and discouragement of opportunistic plaintiffs who have no significant information to contribute of their own.'"
First, the parties dispute whether the public disclosure bar remains "jurisdictional" after certain amendments to the FCA made in 2010 as part of the Patient Protection and Affordable Care Act, Pub. L. 111-148, § 10104(j)(2), 124 Stat. 119, 901-02. The parties also disagree as to which version of the bar should apply in this case, because the alleged conduct took place both before and after the effective date of the amendments.
Before the 2010 amendments, the FCA stated:
31 U.S.C. § 3730(e)(4)(A) (2006). Section 3730(e)(4)(A) now provides:
31 U.S.C. § 3730(e)(4)(A) (2010).
Before the 2010 amendments, courts placed the burden on the relator to establish jurisdiction, and were entitled to consider and weigh evidence outside the pleadings, because the jurisdictional challenge was to the actual facts supporting the claim, not to how the claim was pleaded.
An issue arises as to whether the public disclosure bar remains a question of jurisdiction after the 2010 amendments, or what allegations are now sufficient to survive a motion to dismiss based on subsection 3730(e)(4)(A). Recently, the Fourth Circuit held that, by "delet[ing] the unambiguous jurisdiction-removing language previously contained in § 3730(e)(4) and replac[ing] it with a generic, not-obviously-jurisdictional phrase (`shall dismiss'), while at the same time retaining jurisdiction-removing language in §§ 3730(e)(1) and (e)(2)," Congress had "ma[d]e it clear that the public disclosure bar is no longer a jurisdiction-removing provision."
This Court is persuaded by the reasoning in
This Court, however, also believes that under the plain language of the amended statute, which commands that a court "shall dismiss" any action based on an enumerated disclosure, the public disclosure bar remains at least a threshold question for dismissal. The bar's stated purpose of discouraging opportunistic lawsuits would largely be defeated by shifting the entire public disclosure analysis to a later stage of litigation.
The parties also dispute which version of the FCA should apply to the claims at issue here. Victaulic argues that the pre-amendment jurisdictional version of the public disclosure bar applies, and the Court should look to facts outside the complaint in conducting a Rule 12(b)(1) analysis. CFI contends that, even though a majority of the relevant time period as defined by CFI (2003 to January 9, 2013) elapsed before the March 23, 2010 effective date of the amendments, the bulk of the imports on which it has based its claims took place after the effective date of the amendments.
The Supreme Court has twice held that the 2010 FCA amendments are not applicable to cases pending before the effective date of the amendments.
The Court is persuaded by the reasoning in
The pre-amendment version of the public disclosure bar provides that no court shall have jurisdiction over an action "based upon the public disclosure of allegations or transaction in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information." 31 U.S.C. § 3730(e)(4)(A) (2006).
The post-amendment version provides that a court shall dismiss an action or claim "if substantially the same allegations or transactions as alleged in the action or claims" were disclosed by way of certain sources: "(i) in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party; (ii) in a congressional, Government Accountability Office, or other Federal report, hearing, audit, or investigation; or (iii) from the news media." 31 U.S.C. § 3730(e)(4)(A) (2010).
The Third Circuit has "adopted a formula to represent when information publicly disclosed in a specified source qualifies as an allegation or transaction of fraud: `If X + Y = Z, Z represents the allegation of fraud and X and Y represent its essential elements. In order to disclose the fraudulent transaction publicly, the combination of X and Y must be revealed, from which readers or listeners may infer Z, i.e., the conclusion that fraud has been committed.'"
Here, Victaulic argues that both the true state of facts (that Victaulic imports many millions of pounds of pipe fittings from China and Poland) and the allegedly "misrepresented" facts (customs data forms on which Victaulic allegedly omitted to state that marking duties were due on its imported goods) have been publicly disclosed in either the "news media" or in Federal or administrative reports.
CFI, on the other hand, contends that (1) the Zepol database is not "news media," and is not generally available to the public because subscribers pay a substantial fee to access its information; and (2) even if the import data is publicly disclosed, CFI's claims are based in large part on the sales information CFI extracted from eBay advertisements, which — although certainly readily accessible to the general public — do not fall within any of the categories of public disclosure listed in § 3730(e)(4)(A).
This action does not fit neatly into the X + Y = Z formula articulated by the Third Circuit. Here, the alleged fraud "Z" is that Victaulic knowingly misrepresented its obligation to pay marking duties, and knowingly failed to pay marking duties that it owed. Assuming for the sake of argument that Victaulic was required to report marking duties on certain customs entry forms, then misrepresented fact "X" is Victaulic's alleged omission of marking duties from the forms. "Y-1" is the true fact that Victaulic imports millions of pounds of pipe fittings from China and Poland. But these two facts do not create any inference of fraud without the additional allegation that only a small percentage of Victaulic's pipe fittings in the United States bear foreign markings (allegedly true fact "Y-2").
Absent "Y-2", the alleged omission of marking duties on customs entry forms is equally consistent with the inference that Victaulic's imported pipe fittings were, in fact, properly marked, and no marking duty was owed. Only the additional allegation regarding the small percentage of pipe fittings with foreign markings on eBay creates any inference that Victaulic did not mark some imported pipe fittings.
The Supreme Court has held that the "sources of public disclosure in § 3730(e)(4)(A), especially `news media,' suggest that the public disclosure bar provides `a broa[d] sweep.'"
Several courts have held that information obtained through a publicly available website implicates the public disclosure bar of the FCA.
In
In
This Court agrees that, at minimum, a publicly available website may qualify as "news media" where the information provided is to some extent curated — that is, where the authors or editors of the website actively gather and disseminate information, provide search tools for the public to analyze data, provide some editorial content, or exercise some control over the information provided — and where the information bears at least some of the "indicia of reliability or substantiation" common to more traditional news media sources.
Victaulic argues that Zepol, which collects import data from CBP and provides it to subscribers in a searchable database, qualifies as both "news media" and "administrative reports" or "Federal reports" for purposes of the public disclosure bar.
The District Court for the District of Columbia recently held that shipping manifest information disclosed on an on-line database similar to Zepol was publicly disclosed for purposes of the FCA.
This Court does not need to decide whether a website that simply collects raw data and makes it available through a searchable database without exercising editorial control over the contents would qualify under a traditional definition of news media, because, like the financial analysis websites at issue in
Moreover, like the data collected by PIERS in
The Court does not find, however, that the information CFI obtained through sales listings on eBay has been publicly disclosed by way of an enumerated source. The Supreme Court has explained that, where the statute does not define a term, a court should "look first to the word's ordinary meaning" and "consider the [public disclosure bar]'s `entire text,' read as an `integrated whole.'"
The Court concludes that, because the product information on which CFI's allegations largely depend was not publicly disclosed by way of a source listed in § 3730(e)(4)(A), the action is not barred under either the current or pre-amendment versions of the FCA.
Victaulic has also moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6), on the grounds that a failure to properly mark goods or to pay marking duties under § 1304(i) of the Tariff Act does not give rise to any claim under the False Claims Act.
Before 2009, the reverse-false-claim
31 U.S.C. § 3729 was amended as part of the Fraud Enforcement and Recovery Act of 2009 ("FERA"). The current version states that any person who "knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government," shall be liable under the Act. 31 U.S.C. § 3729(a)(1)(G). The amendments also added a definition of the term "obligation." 31 U.S.C. § 3729(b)(3).
Before the 2009 amendments, a number of courts held that a violation of a statute that creates only a "contingent" obligation to pay money to the government (
The Sixth Circuit also held that, although the claim regarding marking duties "present[ed] the most difficulty," those too could not be recovered under the FCA. Id. at 741-42.
The parties dispute whether
As discussed above, the Tariff Act states that duties for failure to mark are "10 per centum ad valorem, which shall be deemed to have accrued at the time of importation, shall not be construed as penal, and shall not be remitted wholly or in part nor shall payment thereof be avoidable for any cause." 19 U.S.C. § 1304(i). CFI argues that the plain language of § 1304(i) creates an established duty (if not necessarily a fixed duty) to pay money that becomes due automatically at the time of importation, which is not a penalty. Victaulic contends, on the other hand, that marking duties under § 1304(i) are merely fines that Victaulic might owe if it imported unmarked or mismarked products and subsequently failed to export, destroy, or properly mark them.
In its reply brief, Victaulic argues that the term "obligation" as defined post-FERA may apply to tariff-based customs duties recoverable under 19 U.S.C. § 1592, but not to marking duties under 19 U.S.C. § 1304(i). In its surreply, CFI argues that any ambiguity in the plain language of the statute is resolved by the legislative history of FERA.
In support of its argument that the 2009 amendment was intended to bring marking duties within the scope of the False Claims Act, CFI also notes that one of the stated purposes of the amendment was to "overrule" the Sixth Circuit's
Whether the 2009 amendments to the FCA capture country-of-origin mismarking or failure to pay marking duties is apparently a novel question. Amicus Curiae Br. 4 (Doc. No. 24-1 at 7). Although instructive, neither the legislative history of the amendments nor pre-FERA case law from other circuit courts is binding on this Court's interpretation of the current language of the statute.
As the Court discussed above, the language of the Tariff Act itself is not very clear as to precisely when the obligation to pay marking duties arises, even if the duty is "deemed to have accrued at importation." It is difficult to determine, therefore, at what point an importer may be said to have "avoided" or "concealed" an "established" duty to pay marking duties arising under § 1304(i).
Nor is it clear that CBP Form 7501 gives rise to an obligation to report that goods are unmarked, or that an importer may owe marking duties. CFI contends that the "any fee" language in the instructions for Form 7501 requires Victaulic to report whether it owes or may owe marking duties, and that Victaulic's omission of a dollar figure for marking duties therefore constitutes a false statement under the FCA.
The Court observes that CBP Form 7501 and its instructions do not refer to marking obligations or duties, and do not provide any collection code under which an importer could report estimated marking duties. Nor does Form 7501 ask the importer to state whether the goods described in the form are properly marked. The form does require the importer to identify a country of origin for the relevant goods, but CFI does not contend that Victaulic has ever misstated that information. In short, the Court is unsure from CFI's allegations at what point Victaulic could plausibly be said to have knowingly concealed or avoided an obligation to pay marking duties, or made a false statement or deliberate omission in connection with its alleged avoidance.
Ultimately, however, the Court need not decide whether the pre- or post-FERA version of the FCA applies to these claims, or whether a failure to mark imported goods or to pay marking duties under the Tariff Act gives rise to a claim under either version of the FCA, because the Court finds that CFI has failed to allege that Victaulic did not properly mark its pipe fittings or avoided any obligation to pay marking duties.
Victaulic has moved to dismiss the complaint under Rule 12(b)(6) on the grounds that, even if a failure to mark goods or to pay marking duties under the Tariff Act gives rise to a claim under the False Claims Act, CFI has failed to state a claim for such violations under the pleading standards of either Rule 8(a) or Rule 9(b) of the Federal Rules of Civil Procedure. The Court agrees.
Although Federal Rule of Civil Procedure 8(a) requires that a complaint contain only "a short and plain statement of the claim showing that the pleader is entitled to relief," to "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests," the plaintiff must nonetheless plead "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do."
"A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."
Further, because claims under the False Claims Act are claims of fraud, CFI must also state its claims with the heightened specificity required by Federal Rule of Civil Procedure 9(b), which demands that a plaintiff "state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). Recently, in
CFI's original complaint is virtually devoid of non-conclusory factual allegations. At most, CFI alleges that based on its review of shipping manifest data, Victaulic has imported approximately 83 million pounds of pipe fittings from China and Poland between 2003 and 2012. In the complaint itself, CFI provides no facts to support its assertions that imported pipe fittings constitute a majority of Victaulic's U.S. sales, or that only a "miniscule fraction" of Victaulic's pipe fittings for sale in the United States bear foreign markings. Finally, CFI provides no basis for its wholly conclusory allegations that Victaulic has falsified its customs entry documents or knowingly avoided paying any required marking duties. Assuming that such actions give rise to a claim under the FCA, the very limited factual allegations in the complaint do not state a claim.
Even taking into account the facts set forth in CFI's opposition briefing and in the declaration of Ms. Woodings, and the further explanations and details provided at oral argument, CFI has not "nudged" its claims "across the line from conceivable to plausible."
The facts alleged in Ms. Woodings's declaration regarding Victaulic's 2003-2012 imports and CFI's price-per-pound estimates reasonably support an inference that imported pipe fittings have comprised a significant portion of Victaulic's U.S. sales in the last decade. These additional facts do not, however, support CFI's conclusions that the majority of Victaulic's imported pipe fittings for sale in the United States are unmarked, or that Victaulic has knowingly failed to mark its imported products.
Even if the Court accepts CFI's assertion that eBay listings constitute a reasonable representative sample of the secondary sale market for pipe fittings in the United States, or that an examination of 221 advertisements from eighty-one sellers over a six-month period could provide data from which to draw accurate wider conclusions about millions of pounds of product imported over a decade, and even assuming that CFI has accurately identified, dated, and examined every Victaulic pipe fitting on eBay, CFI has alleged no facts to show that any of the unmarked pipe fittings on eBay are not, in fact, U.S.—made.
Based on the large number of pipe fittings imported by Victaulic in recent years, it is certainly possible that some of the unmarked pipe fittings for sale on eBay are foreign-made. But that possibility is not sufficient to support a reasonable inference that Victaulic has deliberately failed to mark the vast majority of its imported pipe fittings.
More importantly, the absence of markings on imported pipe fittings (or presence of inadequate markings, such as the two that CFI apparently found) is not dispositive with regard to the payment of marking duties.
Where, as here, the complaint pleads facts that are "merely consistent with" a defendant's liability, the plaintiff has failed to state a claim.
Because CFI has failed to allege facts in either its complaint or its opposition briefing sufficient to support a plausible claim that Victaulic has failed to mark its imported pipe fittings, that Victaulic falsified customs entry documents, that Victaulic owed marking duties, or that Victaulic knowingly concealed or avoided any obligation to pay marking duties, the motion to dismiss is granted, and the complaint is dismissed with prejudice.
An appropriate order shall issue.
For example, 19 U.S.C. § 1304(j) states that "[n]o imported article held in customs custody for inspection, examination, or appraisement shall be delivered until such article . . ., whether or not released from customs custody, shall have been marked in accordance with the requirements of this section
