Furniture Importer to Pay $15 Million to Settle Whistleblower's Duty Evasion Lawsuit

A furniture importer agreed to pay $15 million to settle a False Claims Act lawsuit that alleged it submitted false entry documentation in an effort to avoid antidumping duties on wooden bedroom furniture from China, said the Justice Department in a Dec. 21 press release (here). University Furniture and its Freedom Furniture Group allegedly classified its imported furniture as office furniture between 2009 and 2012, despite selling the furniture in the student housing market for use in dormitory bedrooms, said DOJ.

A competing furniture manufacturer, University Loft, originally filed the whistleblower case in 2013, with the U.S. taking over as lead plaintiff on Dec. 16. University Loft will receive a share of $2.25 million out of the $15 million University Furniture agreed to pay, said DOJ. Under the out-of-court settlement, in which University Furniture did not admit to any of the claims, all participants in the case will jointly file for its dismissal upon receiving payment of the agreed amounts. The settlement does not preclude the government from seeking criminal charges against University Furniture or its principals, though a DOJ spokeswoman said there are currently no criminal charges filed.

According to University Loft’s complaint, its suspicions of evasion were aroused when a series of long-held contracts for furnishing off-campus student housing were wrested away by University Furniture. After being told it was being underbid, University Loft dug up a bill of lading that described a University Furniture shipment of a “2-drawer lateral file.” University Furniture did not sell any filing cabinets at the time, and the item number listed on the bill of lading matched the SKU number for University Furniture’s 2-drawer bedroom chest, said the complaint.

University Loft claimed that an undercover visit to a known supplier of University Furniture confirmed that the supplier was telling its prospective clients to list the wooden bedroom furniture as office furniture. The complaint also alleged that University Furniture was misclassifying its entries of wooden bedroom furniture under HTS subheadings for other types of furniture, rather than under subheading 9403.50.90 as “wooden furniture of a kind used in the bedroom.” It contended that the supplier, and presumably University Furniture, eventually moved on to falsely declaring the origin of the Chinese wooden bedroom furniture as Vietnam, and listing a Vietnamese company as the producer. During only the period 2011 through 2013, University Furniture avoided paying over $8 million in duties, according to the complaint.

Reached for comment, University Furniture’s lawyer denied the allegations, saying the settlement will simply allow the company to move on. "University Furnishings, LP settled this False Claims Act lawsuit, originally filed by a competitor, so that the company could move forward with a key strategy transaction that will permit the company to make significant investments in its future,” said Danny Ashby of Morgan Lewis. “UF denied any liability or wrongdoing in connection with the settlement, and the company continues to believe that it did nothing wrong. The conduct at issue ended years ago, and UF has been under different leadership since that time. Now that this issue is behind us, we look forward to returning our focus to serving our customers.”

The False Claims Act settlement follows a separate $1.3 million settlement in a lawsuit brought by University Loft against University Furniture in state court, according to University Loft’s lawyer, Steve Smit of Graves Dougherty. University Loft plans to use some of the proceeds “to educate students about the importance of strong business ethics and corporate conduct,” it said in a press release. Alongside other contributions, “University Loft Company hopes this funding will help ensure that students understand that a great business can be built when ethical and honest business practices are the foundation and the drive train of the company,” it said.

Meanwhile, University Loft in September filed another lawsuit in federal district court in Austin, alleging another competitor in the student housing furniture market, Blue Furniture Solutions, is also undercutting University Loft’s bids by engaging in antidumping duty evasion. University Loft says Blue Furniture is describing its wooden bedroom furniture as metal bedroom and office furnishings, and misclassifying its entries to avoid detection. Smit, also lawyer for University Loft in the Blue Furniture case, did not comment on the new lawsuit, nor did counsel for Blue Furniture.

Email ITTNews@warren-news.com for a copy of University Loft's complaints or the settlement agreement.