Amended Complaint 'Vain Hope' to Save Fraud Claims Over Misclassified Metal Lids, Importer Argues

The U.S., in an amended complaint, continues to fail to show that importer Crown Cork & Seal (CCS) committed fraud or gross negligence over misclassified metal lid imports, the importer argued in a June 22 motion to dismiss at the Court of International Trade. Seeking again to have the trade court toss the U.S.'s first two counts in the case, CCS said the amended complaint doesn't provide any new facts that can revive the two counts which Judge M. Miller Baker already dismissed (U.S. v. Crown Cork & Seal, CIT #21-00361).

DOJ filed the case to collect unpaid duties over the alleged misclassification of 543 entries of "metal lids for food, beverage, household and consumer products" from Europe brought in during 2004-2009. The U.S. argues the goods are properly classified under Harmonized Tariff Schedule subheading 8309.90.0000 and dutiable at that 2.6% rate. CCS attempted to classify its metal lids under the duty-free HTS subheading 7326.90.1000.

The government conducted an investigation into the alleged criminal conduct for over a decade. This inquiry, which included interviews with CCS employees and discussions with CCS counsel, led the importer to move to dismiss the first two counts of the case. In the original motion, the importer argued that DOJ bases its claims of fraud and gross negligence on only that the imports were misclassified. Following an oral argument over the motion (see 2112130041), Baker in May issued a ruling dismissing the first two counts, leaving only the negligence claim.

During the argument, Baker said "this complaint does not arise to the level of showing a plausibility of such conduct. ... And I just don’t think here on the face of this that you’ve gotten beyond mere possibility of gross negligence and fraud." The U.S. then filed an amended complaint seeking to revive the two dismissed counts. CCS moved again to toss the claims.

"The Government has ... now come back a second time and filed an Amended Complaint with a few threadbare and inconsequential amendments in the vain hope of salvaging its fraud and gross negligence claims in order to extract a windfall penalty of almost 16 times the amount of duties and fees the Crown Companies have already paid to the Government in connection with this matter," the brief said. "Try as it might, the Government has fallen short, again, as it has failed to produce any new material facts that save Counts I and II."

The importer argued the amended complaint "cannot even pretend" there is conduct that can rise above a mere negligence claim and said the court should rule against the DOJ's bid to "shoehorn fraud and gross negligence claims into a set of facts." CCS cited a Supreme Court case, Ashcroft v. Iqbal, to argue that "conclusory pleading does not suffice to state a valid claim of fraud or gross negligence."

CCS told the court the U.S. is advancing a new allegation that it knows is not true. In the complaint, DOJ said the importer later admitted it falsely classified all 543 entries at issue. "But the Government, which has spent the better part of a decade investigating this matter, knows this new allegation is simply not true," the brief said. "The Crown Companies have never 'admitted to the Government that they falsely classified all of the 543 entries at issue.' Ever." Further, the U.S. failed to acknowledge that CCS filed voluntary disclosures in 2009 when it became aware of the potentially wrong classifications, the brief said.