Supreme Court Decision on Review Request for Trek Leather Case Expected by June

A controversial case on the liability of compliance and corporate officers for their employer’s customs violations now goes to the Supreme Court justices’ chambers for a decision on whether to hear the appeal, after Harish Shadadpuri, owner of Trek Leather, filed a final brief on April 27 in favor of his petition for certiorari. Shadadpuri's lawyer, Al Daniel, argued that a decision from the Court of Appeals for the Federal Circuit misinterpreted the customs penalty laws and was unsupported by the facts of the case. Daniel expects a decision from the Supreme Court on whether to consider the case by the end of June.

The full ten-judge Federal Circuit in September 2014 found Shadadpuri liable for penalties under 19 USC 1592 for his company’s failure to declare assists on imported men’s suits (see 14091703), reversing a ruling by a three-judge panel in 2013 (see 13073025). Notably, Shadadpuri’s incorporated company, Trek Leather, had been importer of record for the shipments, not Shadadpuri personally.

In his petition asking the Supreme Court to hear the case, filed in February, Shadadpuri argued that he cannot be held personally liable for the violations of his corporation unless the court finds the circumstances of the case warrant disregarding corporate protections or finds that he aided and abetted the violations of his company (see 1502190022). In this case, CAFC did neither. The American Association of Exporters and Importers filed a brief in support, saying subjecting corporate employees to liability would cause upheaval in the importing community (see 1503170027). The government responded in a brief filed April 15, arguing that the courts have long approved finding corporate officers liable for the customs violations of their employers (see 1504200023).

Shadadpuri’s April 27 reply brief, the last to be filed before the case is distributed to the Supreme Court justices for a review on whether to hear the appeal, reiterates earlier arguments that the Federal Circuit’s ruling ignores the way 19 USC 1592 is written. The customs penalty statute has two parts: 1592(a)(1)(A), which applies to the person who entered, introduced or attempted to introduce by means of false statements, i.e., the importer of record or customs broker; and 1592(a)(1)(B), which penalizes aiding and abetting violations of 19 USC 1592(a)(1)(A). Only importers of record can be liable for (a)(1)(A) penalties; the actions of their employees can only be aiding and abetting their importer of record employers, said Shadadpuri. Applying 19 USC 1592(a)(1)(A) to what could only have been an aiding and abetting violation runs counter to the intent of Congress because it makes 19 USC 1592(a)(1)(B) meaningless, he said.

The Federal Circuit’s theory that Shadadpuri was covered by (a)(1)(A) because he “introduced” the merchandise fails to account for the facts of the case, said his reply brief. The court came up with the theory because Shadadpuri couldn’t be held liable for entry-related violations as he wasn’t importer of record, said Shadadpuri. However, the misstatements charged by the government – specifically, the provision of invoices that didn’t show assists – were not violations until they were provided to the government as part of the entry process, said Shadadpuri. Even if corporate employees can be held liable for introducing goods, the charges in this case were for entry violations that could only be committed by the importer of record, he said.

Obtaining Supreme Court review of any case is statistically improbable, with the vast majority of appeals from lower courts allowed to stand. In its 2012 term, the court granted review only 93 of the 8,806 appeals it was asked to take (here), and in 2013 heard only 76 of 8,580 (here). According to Daniel, Shadadpuri's appeal will be placed on the court's distribution list in the next few days. The case will then go to "conference," where Supreme Court clerks and justices will decide whether it merits review. Daniel expects that the Supreme Court will decide on whether to take up the appeal before the end of its term in June, he said.

Email ITTNews@warren-news.com for a copy of Shadadpuri’s reply brief.