United States v. Trek Leather, Inc.
2011 WL 2421225
Ct. Intl. Trade2011Background
- Trek Leather, Inc. was importer of record for 72 entries of men's suits (Feb 2–Oct 8, 2004).
- Harish Shadadpuri was Trek's president and 40% owner; he also owned Mercantile Electronics, LLC, consignee for the goods.
- Fabric assists were provided by Shadadpuri via corporate entities and incorporated into the suits by manufacturers.
- CBP investigated in 2004 and found entry declarations consistently failed to reflect the cost of fabric assists, underreporting duties.
- A prior 2002 investigation of Mercantile Wholesale, Inc. (another Shadadpuri entity) showed similar omissions; $46,156.89 in unpaid duties followed, but no action was filed.
- In this action, Government seeks: (i) damages for fraud or gross negligence; (ii) civil penalties; and (iii) unpaid duties; Trek admits gross negligence but denies fraud.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Fraud liability under 1592(a) | Government contends intentional fraud can be implied. | Shadadpuri argues no intent to defraud. | Fraud issue cannot be decided on summary judgment. |
| Gross negligence under 1592(a) | Defendants' omissions were material and done with knowledge or reckless disregard. | Defendants dispute personal liability and mens rea. | Grant summary judgment for Government on Count II; gross negligence established. |
| Personal liability of Shadadpuri under 1592(a) | Shadadpuri as a person is liable for gross negligence. | Personal liability contested. | Shadadpuri personally liable under §1592(a). |
| Damages and penalties | Defendants liable for unpaid duties and civil penalties. | Arguments on amount and apportionment not favorable. | Unpaid duties: $45,245.39; Penalties: $534,420.32; joint and several. |
Key Cases Cited
- United States v. Inn Foods, Inc., 560 F.3d 1338 (Fed. Cir. 2009) (statutory recovery in §1592(d) not limited to importers and sureties)
- United States v. Matthews, 533 F.Supp.2d 1307 (2007) (plain language of §1592 broad liability for persons)
- United States v. Complex Mach. Works Co., 83 F.Supp.2d 1307 (1999) (court's within-statutory discretion for penalties under §1592(c)(2))
- United States v. Thorson Chem. Corp., 795 F.Supp.1190 (1992) (consideration of aggravating/mitigating factors in penalties)