United States v. Trek Leather, Inc.
2013 U.S. App. LEXIS 15441
| Fed. Cir. | 2013Background
- Trek Leather, Inc. was the importer of record for 72 U.S. entries of men’s suits in 2004; Trek’s consignee was Mercantile Electronics, which Shadadpuri partly owned.
- Shadadpuri was Trek’s president and sole shareholder and held 40% in Mercantile Electronics; he was not a licensed customs broker.
- Trek and Mercantile provided fabric assists to foreign manufacturers; assists are dutiable components under 19 U.S.C. § 1401a(h)(1)(A).
- Customs discovered in 2004 that Trek failed to declare the value of fabric assists, lowering duty; Shadadpuri acknowledged the omission.
- The government sought penalties under § 1592(a) for fraud/gross negligence and proposed penalties under § 1592(c)(2) for gross negligence, with Trek and Shadadpuri liable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can corporate officers be personally liable under §1592(c)(2) for importer negligence? | Shadadpuri argues officers aren’t liable absent veil piercing or fraud. | Gov't contends ‘person’ in §1592(a) is broad, making officers personally liable. | No; penalties require a definable duty and direct liability or veil piercing. |
| Does §1592(a) allow liability for negligent entries by corporate officers who are not importers of record? | Hitachi limits liability to importers of record; officers cannot be liable for negligence. | §1592(a) broadly covers any ‘person’ who commits negligent entry. | Liability is not broad enough to include non-importers absent other theories. |
| May the government pursue officer liability under §1592(a) for aid and abetting of fraud in this context? | Shadadpuri’s liability would require aiding/abetting fraud if proven. | Government abandoned fraud theory against Shadadpuri. | Not necessary to decide here; government did not pursue this route on appeal. |
| Is piercing the Trek corporate veil required to hold Shadadpuri personally liable for Trek’s negligence? | Veil piercing could bind Shadadpuri to Trek’s duties. | Absent veil piercing, officers act as separate entities; no direct personal liability. | Veil piercing not established; no personal liability for Shadadpuri on negligence. |
| Should Hitachi be read to bar personal liability for negligent officers in this case? | Hitachi’s framework does not foreclose officer liability for negligence. | Hitachi controls, preventing personal liability for negligent acts absent fraud. | Hitachi controls; officers not personally liable for Trek’s negligence here. |
Key Cases Cited
- United States v. Hitachi America, Ltd., 172 F.3d 1319 (Fed.Cir.1999) (corporate parent not liable for importer’s negligence; aiding/abetting limited to fraud)
- United States v. Appendagez, Inc., 560 F.Supp.50 (Ct. Int’l Trade 1988) (corporate officer may be liable for false statements if knowingly participated)
- United States v. Matthews, 533 F.Supp.2d 1307 (Ct. Int’l Trade 2007) (corporate officers can be held jointly and severally liable for violations)
- United States v. Islip, 18 F.Supp.2d 1047 (Ct. Int’l Trade 1998) (corporate officer liable for fraud when knowingly participating)
- Neder v. United States, 527 U.S. 1 (Supreme Court 1999) (statutory interpretation of negligence and culpability elements)