Warner-Lambert Co. v. United Stat

2008 CIT 31

• Court: United States Court of International Trade
• Decided: March 14, 2008
• Docket: Consol. 02-00520
• Status: Errata

Opinion

Slip Op. 08-31

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS

_____________________________________ : WARNER-LAMBERT COMPANY, : : Plaintiff, : : Consolidated v. : Court No.: 02-00520 : UNITED STATES, : : Defendant. : _____________________________________ :

Held: Plaintiff’s motion for summary judgment is granted in part and denied in part. Plaintiff’s motion for sanctions is denied.

Dated: March 14, 2008

Rode & Qualey, (Patrick D. Gill); of counsel: Eleanore Kelly- Kobayashi, for Warner-Lambert Company, Plaintiff.

Jeffrey S. Bucholtz, Acting Assistant Attorney General, Barbara S. Williams, Attorney-in-Charge, International Trade Field Office, Bruce N. Stratvert, Civil Division, Commercial Litigation Branch, United States Department of Justice; of counsel: Chi S. Choy, International Trade Litigation, United States Customs and Border Patrol, for the United States, Defendant.

OPINION

TSOUCALAS, Senior Judge: Plaintiff Warner-Lambert Company

(“Plaintiff” or “WLC”) challenges the classification of the

merchandise at issue by the United States Bureau of Customs and

Border Protection (“Customs”) under subheading 1704.90.35 of the

Harmonized Tariff Schedule of the United States (“HTSUS”) covering Court No. 02-00520 Page 2

“confections or sweetmeats ready for consumption, other.”

Plaintiff maintains that the merchandise is properly classified

under subheading 3306.90.00, HTSUS, as “preparation for oral or

dental hygiene, other.” This matter is before the Court on

Plaintiff’s motion for summary judgment pursuant to USCIT R. 56.

Plaintiff also moves for sanctions against Defendant pursuant to

USCIT R. 11(c).

JURISDICTION

The Court has jurisdiction over this matter pursuant to 28

U.S.C. § 1581 (2000).

STANDARD OF REVIEW

On a motion for summary judgment, the Court must determine

whether there are any genuine issues of fact that are material to

the resolution of the action. See Anderson v. Liberty Lobby, Inc.,

477 U.S. 242, 248 (1986). A factual dispute is genuine if it might

affect the outcome of the suit under the governing law. See id.

Accordingly, the Court may not decide or try factual issues upon a

motion for summary judgment. See Phone-Mate, Inc. v. United

States, 12 CIT 575, 577, 690 F. Supp. 1048, 1050 (1988). When

genuine issues of material fact are not in dispute, summary

judgment is appropriate if a moving party is entitled to judgment Court No. 02-00520 Page 3

as a matter of law. See USCIT R. 56; see also Celotex Corp. v.

Catrett, 477 U.S. 317, 322-23 (1986).

DISCUSSION

I. Background

This consolidated action concerns the proper classification of

the subject merchandise, which Plaintiff purports to be Certs®

Powerful Mints. See Complaint ¶ 6; Answer ¶ 6. Certs® Powerful

Mints are sugar-free breath mints containing the active ingredient

Retsyn®, which consists of partially hydrogenated cottonseed oil

and copper gluconate. See Complaint ¶¶ 9, 11, 12; Answer ¶¶ 9, 11,

12. Customs liquidated the subject entries under subheading

1704.90.35 as a sugar confectionery. See Complaint ¶ 7; Answer ¶

7. WLC timely protested said classification pursuant to 19 U.S.C.

§ 1514. See Complaint, ¶ 4; Answer ¶ 4.

The United States Court of Appeals for the Federal Circuit

(“CAFC”) previously considered the sugar-free Certs® Powerful Mints

(hereinafter “test case”) and found them to be properly classified

under subheading 3306.90.00, HTSUS, covering oral or dental hygiene

products. See Warner-Lambert Co. v. United States, 407 F.3d 1207

(Fed. Cir. 2005). Familiarity with the CAFC’s opinion in Warner-

Lambert Co. v. United States, 407 F.3d 1207 and the trial court’s

opinion in Warner-Lambert Co. v. United States, 28 CIT 788, 343 F. Court No. 02-00520 Page 4

Supp. 2d 1315 (2004), is presumed.

Plaintiff maintains that the goods covered in the subject

entries are identical to the Certs® Powerful Mints considered in

the test case. See Mem. Supp. Pl.’s Mot. Summ. J. (“Pl.’s Mem.”)

at 1-7. Plaintiff also argues that the Court should rule in its

favor by application of the principles of res judicata or stare

decisis. See Pl.’s Mem. at 8-10. Customs concedes that if the

subject merchandise is in fact identical to the Certs® Powerful

Mints considered in the test case, then it would be properly

classified under subheading 3306.90.00, HTSUS. See Def.’s Mem.

Supp. Opp. Pl.’s Mot. Sum. J. at 4. However, Customs contends that

summary judgment is inappropriate because there are material facts

in dispute concerning whether the merchandise is in fact Certs®

Powerful Mints. See id. at 2-3.

All liquidated duties with respect to the subject entries were

paid prior to the commencement of this action. See Complaint ¶ ;

Answer ¶ 5. On August 14, 2007, the record of the test case was

incorporated in the record of this case.

II. Res Judicata And Stare Decisis

Neither res judicata nor stare decisis requires the Court to

find in favor of the Plaintiff. The United States Supreme Court

held long ago that res judicata does not apply to customs

classification cases. See United States v. Stone & Downer Co., 274 Court No. 02-00520 Page 5

U.S. 225, 233-37 (1927); DaimlerChrysler Corp. v. United States,

442 F.3d 1313, 1321 (Fed. Cir. 2006); Avenues in Leather, Inc. v.

United States, 317 F.3d 1399 (Fed. Cir. 2003); Schott Optical

Glass, Inc. v. United States, 750 F.2d 62, 64 (Fed. Cir. 1984).

Moreover, “the doctrine of stare decisis applies to only legal

issues and not issues of fact[.]” Avenues In Leather v. United

States, 423 F.3d 1326, 1331 (Fed. Cir. 2005). The determination of

whether the subject merchandise falls within the description of a

tariff provision, as is the case here, is a question of fact. See

id. Thus, the Court rejects Plaintiff’s arguments that res

judicata and/or stare decisis requires a judgment in its favor.

III. Material Facts Alleged To Be In Dispute

Customs argues that summary judgment should not be granted in

favor of the plaintiff with respect to the merchandise imported

under entry numbers 201-1338775-5 and 201-1338890-2. See Def.’s

Mem. Supp. Opp’n Pl.’s Mot. Summ. J. (“Def.’s Opp’n”) at 3.

According to Customs, there exists a dispute as to a material fact

with regard to these two entries because the commercial invoices1

1 Although Defendant states that the invoices for entry numbers 201-1338775-5 and 201-1338890-2 describe Certs Peppermint Standard with item number 35600-00 and Certs Spearmint Standard with item number 35650-00, this is inaccurate. See Def.’s Opp’n at 3. The actual invoices for these two entries reflect item numbers 35600-40 and 35650-40 for Certs Peppermint Standard and Certs Spearmint Standard, respectively. See Pl.’s Mem., Exhibits M and N. The Court will employ the item numbers appearing on the Court No. 02-00520 Page 6

describe the goods as “Certs Peppermint Standard” with

corresponding item number 35600-40 and “Certs Spearmint Standard”

with corresponding item number 35650-40 while the corresponding

bills of lading describe the same goods as “Cool Mint Drops.”2 See

Def.’s Opp’n at 3. Based on the conflicting evidence, Customs

contends that there exists an issue of fact as to the identity of

the goods covered in these two entries. See id. at 3.

Plaintiff counters that Defendant’s position is in conflict

with the record testimony for the test case because the invoices

have the identical descriptions, product codes, and item numbers3

as those in the test case, which were held by this Court to be

Certs® Powerful Mints. See Pl.’s Reply Def.’s Mem. Opp’n Pl.’s

Mot. Summ. J. (“Pl.’s Reply”) at 1-3. Plaintiff also claims that

Defendant’s statements concerning the bills of lading are hearsay

invoices. 2 Certs® Cool Mint Drops are also breath mints imported by WLC that contain sugar rather than artificial sweetener. The classification of Certs® Cool Mint Drops is currently pending litigation. See Warner Lambert Co. v. United States, 32 CIT __, Slip Op. 08-25 (March 3, 2008). 3 Defendant notes that the item numbers appearing on the invoices for the entries at issue, 35600-40 and 35650-40 are not identical to the item numbers from the test case, which were 35600-00 and 35650-00. See Def.’s Opp’n at 2-3. As Plaintiff notes, however, Plaintiff’s witness testified at trial in the test case that item numbers beginning with ‘356’ indicate Certs® Powerful Mints. See Pl.’s Reply at 2-3. Thus, the item numbers 35600-40 and 35650-40 are consistent with item numbers for Certs® Powerful Mints. Court No. 02-00520 Page 7

and of no probative value. See Pl.’s Reply at 9.

The Court finds, however, that Defendant has established that

there exists a dispute as to a material fact. “As the moving

party, [Plaintiff has] the burden of showing the absence of a

genuine issue as to any material fact, and for these purposes the

material it lodged must be viewed in the light most favorable to

the opposing party.” Adickes v. S. H. Kress & Co., 398 U.S. 144,

157 (1970). Viewed in the light most favorable to Customs, the

nonmoving party, the conflicting description of goods in the bills

of lading could reasonably support a determination that the

merchandise at issue is not Certs® Powerful Mints, but rather

Certs® Cool Mint Drops. The Court finds no merit to Plaintiff’s

conclusory claim that bills of lading are hearsay and of no

probative value. Commercial invoices, packing slips and bills of

lading are all evidence which can aid the Court in reaching the

proper classification. See, e.g., Peterson Electro Musical

Products v. United States, 7 CIT 293, 295 (1984). Thus, this

contradiction speaks to a material fact in dispute because if the

goods were, in fact, Cool Mint Drops, as described in the bills of

lading, the decision of the test case would not be dispostive in

their classification. See supra note 2. Plaintiff cannot rest

upon the trial court’s findings of fact from the test case in this

instance because there is no evidence that the trial court was

presented with similar conflicting descriptions of the merchandise. Court No. 02-00520 Page 8

Accordingly, Court denies Plaintiff’s motion for summary judgment

with respect to entry numbers 201-1338775-5 and 201-1338890-2.

With respect to the remaining entries,4 the Court finds that

Plaintiff has successfully established that the goods are Certs®

Powerful Mints based on the commercial invoices and packing slips

for these entries, which are consistent with the trial court’s

finding of fact from the test case that “the subject merchandise

was described on plaintiff’s invoices as Powerful Mints Spearmint,

Certs® Peppermint Standard, and Certs® Spearmint Standard but all

constitute Certs® Powerful Mints.” Warner-Lambert Co., 28 CIT at

789, 343 F. Supp. 2d at 1317. Moreover, consistent with the trial

testimony from the test case, the item numbers and product codes

for the goods covered in these remaining entries begin with “356"

and “710," respectively, indicating that they are Certs® Powerful

Mints.

Defendant nearly concedes that the remaining entries are

classifiable in heading 3306, HTSUS, because Customs previously

4 The remaining entries consist of entry numbers 201- 1667714-5, 201-1667816-8, 201-1667927-3, 201-1667970-3, 201- 1668031-3, 201-1668358-0, 201-3033223-0, 201-1337537-0, 201- 3034291-6, 201-1337894-5, 201-1337885-3, 201-1338169-1, 201- 1339496-7, 201-1339256-5, 201-3036725-1, 201-1669985-9, 201- 1670460-0, 201-1669761-4, 201-1669949-5, 201-1671009-4, 201- 1341873-3, 201-1669537-8, 201-1669399-3 and 201-3033876-5 (hereinafter “remaining entries”). Excluded from the remaining entries are: (1) entry numbers 201-1338775-5 and 201-1338890-2 for reasons discussed, supra; (2) entry numbers 201-1669985-9 and 201-1669399-3 which were liquidated duty-free under the General System of Preference, see Pl.’s Mem. at 3, FN *, and (3) entry number 201-1337821-8, which Plaintiff abandons. See id.. Court No. 02-00520 Page 9

approved other protests involving merchandise invoiced with item

numbers 35650-40 and 35600-40. See Def.’s Opp’n at 3. Customs,

however, insists that it approved those protests on the ground that

the goods are sugar-free and not necessarily because they are

Certs® Powerful Mints. See id. The Court finds this argument

less than convincing. Sugar-free breath mints without more are not

per se classifiable under Heading 3306, HTSUS, as an oral or dental

hygiene product.

In short, the Court finds that Defendant failed to put forth

any specific evidence to rebut Plaintiff’s evidence that

merchandise covered in the remaining entries are Certs® Powerful

Mints. “[I]f the adverse party does not respond with specific

evidence, summary judgment, if appropriate, shall be entered

against the adverse party.” Saab Cars USA Inc. v. United States,

434 F.3d 1359, 1369 (Fed. Cir. 2006) (internal quotation marks

omitted)(quoting USCIT R. 56e). Accordingly, the Court holds that

Customs incorrectly classified the remaining entries under

subheading 1704.90.35, HTSUS, and grants summary judgment in favor

of Plaintiff with respect to the remaining entries. Court No. 02-00520 Page 10

IV. Plaintiff’s Motion For Sanctions

Subdivision (b) of USCIT R. 11 provides:

(b) Representation to Court. By presenting to the court (whether by signing, filing, submitting, or later advocating) a pleading, written motion, or other paper, an attorney or unrepresented party is certifying that to the best of the person's knowledge, information, and belief, formed after any inquiry reasonable under the circumstances, – (1) it is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation; (2) the claims, defenses, and other legal contentions therein are warranted by existing law or by a non- frivolous argument for the extension, modification, or reversal of existing law or the establishment of new law; (3) the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery; and (4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief.

Subdivision (c) of USCIT R. 11 provides, inter alia,:

(c) Sanctions. If, after notice and a reasonable opportunity to respond, the court determines that subdivision (b) has been violated, the court may, subject to the conditions stated below, impose an appropriate sanction upon the attorneys, law firms, or parties that have violated subdivision (b) or are responsible for the violation.

Plaintiff contends that Customs violated Rule 11(b) by filing

certain unqualified denials in its Answer.5 See Pl.’s Mot.

5 In particular, Plaintiff objects to paragraphs 6, 25 and 38 of the Answer. Plaintiff alleges in paragraph 6 of the Complaint that “[t]he merchandise in issue is Certs Powerful Mints.” Defendant denies this allegation. See Answer ¶ 6.

Plaintiff alleges in paragraph 25 of the Complaint that “[t]he merchandise in issue is Certs Powerful Mints identical to the merchandise involved in the Test Case.” Defendant denies this allegation. See Answer ¶ 25.

Plaintiff alleges in paragraph 38 of the Complaint that Court No. 02-00520 Page 11

Sanctions at 1-3. Arguing that the Answer filed in this case is

contradictory to knowledge and information in Defendant’s

possession, Plaintiff claims Defendant caused unnecessary delay and

needless increase in the cost of litigation in violation of USCIT

R. 11(b)(1). See id. at 10. Plaintiff further argues that

Defendant violated Rule 11(b)(3) by making allegations and factual

contentions in the Answer that lack evidentiary support and are

contrary to the evidence available to Defendant. See id. at 11.

Moreover, Plaintiff argues that Defendant violated Rule 11(b)(4)

because the denials of factual contentions are not warranted on the

evidence and the denials for lack of information are contrary to

the facts in the incorporated record. See id. Thus, Plaintiff

seeks an award of attorneys’ fees to Plaintiff’s attorneys, along

with compensation for expenses pursuant to Rule 11(c)(2). See id.

Customs counters that it was not improper to deny the allegations

of the Complaint because none of the answers were inaccurate and

all of them had reasonable support. See Def.’s Resp. Pl.’s Mot.

Sanctions at 1-5.

The Court has carefully considered Plaintiff’s arguments, but

“[i]nasmuch as the imported merchandise in issue is identical with the merchandise involved in the Test Case, it must be classified as preparations for oral or dental hygiene under subheading 3306.90.00, HTSUS, as claimed herein.” Defendant avers that “the allegations of this paragraph constitute conclusions of law to which no response is required. To the extent a response is required, denies.” See Answer ¶ 38. Court No. 02-00520 Page 12

finds that Defendant’s conduct in this litigation does not warrant

imposition of sanctions. Defendant’s responses to the allegations

contained in the Complaint were not improper in light of the

variations and contradictions in the description of the goods in

the commercial invoices, bills of lading and packing slips.6 There

is insufficient evidence to demonstrate that the Answer was filed

for an improper purpose such as to harass or to cause unnecessary

delay and needless increase in the cost of litigation. The

allegations and factual contentions in the Answer are sufficiently

supported by evidence. The denials of factual contentions and the

denials for lack of information are also consistent with the

evidence. Indeed, it was not unreasonable for Customs to question

the identity of the exact merchandise involved in the entries of

this action.7 In short, the Court is unconvinced that by engaging

in the conduct which Plaintiff complains of Customs violated USCIT

R. 11. As such, Plaintiff’s motion for sanctions is denied.

6 Moreover, the Answer was filed before the record of the test case was incorporated in the record of this action. 7 It appears that at least one entry covered goods described as “Certs Spearmint Bulk” on the commercial invoice. The records of this case and the test case do not reflect any evidence that “Certs Spearmint Bulk” is the same as “Certs Powerful Mints.” Court No. 02-00520 Page 13

CONCLUSION

For the foregoing reasons, Plaintiff’s motion for summary

judgment is denied with respect to entry numbers 201-1338775-5 and

201-1338890-2 and is granted with respect to the remaining entries.

Plaintiff’s motion for sanctions is also denied.

/s/ Nicholas Tsoucalas NICHOLAS TSOUCALAS SENIOR JUDGE

Dated: March 14, 2008 New York, New York ERRATA

Warner-Lambert Co. v. United States, Consol. Court No. 02-00520, Slip-Op. 08-31, dated March 14, 2008.

Page 1 of the Order, Paragraph 2, Line 6: “201-1669985-9" should be deleted.

Page 1 of the Order, Paragraph 2, Line 8: “201-1669399-3" should be deleted.

Page 1 of the Order, Paragraph 3, Line 2: “1704.90.35" should read: “3306.90.00"

March 14, 2008