The Ninth Circuit Court of Appeals in Island Industries v. Sigma Corp., upheld a lower court jury determination that an importer of welded pipe fittings is liable for $8 million in unpaid antidumping duties under the False Claims Act (“FCA”). The penalty under the FCA is trebled totaling the liability to over $32 million for importer Sigma Corp.
The facts of the case reveal that Sigma had imported certain welded “outlets” manufactured in China from 2010 to 2018 that were described as steel couplings and claimed that the goods were not subject to antidumping duties pursuant to the existing antidumping duty order on carbon steel butt-weld pipe fittings from Taiwan even though the court found them to be “nearly identical” to those in a 1992 scope ruling which had found the fittings to be within the scope of the order. Sigma’s competitor Island Industries filed an FCA claim as a qui tam relator alleging that Sigma imported the “outlets” describing them as steel couplings even though they were subsequently marketed to customers as welded outlets. Also, Sigma falsely claimed that the imported goods were not subject to AD duties.
The 9th Circuit first dealt with the issue of jurisdiction. The key concern was whether exclusive jurisdiction for civil cases related to imported goods and the associated attempts to recover customs duties lies with the Court of International Trade. The 9th Circuit said that it had jurisdiction because 28 U.S.C. §1582 had “no jurisdictional obstacle to a relator’s FCA action in federal district court to recover customs duties.” The Supreme Court had previously held that the United States is a party to a FCA cases in only those circumstances where it intervenes. In this case, the United States did not intervene and the case remained a private FCA action brought by Island Industries, therefore jurisdiction was proper at the 9th Circuit.
The 9th Circuit went on to assess various claims raised by Sigma and refuted Island Industries’ case, finding that none of Island Industries’ arguments were convincing. The court held that while penalty cases brought by the U.S. government under 19 U.S.C. §1592 have some overlap with FCA cases, it is not an exclusive remedy given that the FCA “expressly contemplates that FCA cases can proceed in parallel with the government’s pursuit” of alternate remedies. One of the more interesting arguments that the court dismissed was Sigma’s claim that since it had no obligation to pay antidumping duties since “Commerce plans to collect additional duties only for entries from recent years, not for older ones like Sigma’s.” not. The court rejected that claim on the basis that “an importer cannot evade duties, wait until its entries are liquidated, and then assert based on that liquidation that its actions did not deprive the government of money.” Finally, the court rejected Sigma’s claim that it could not have made a false claim or statement because a reasonable importer could have believed that no duties were owed. This defense was barred under U.S. ex rel. Schutte v. SuperValu, where the Supreme Court said that the FCA’s scienter element focuses on defendant’s “knowledge and subjective beliefs — not to what an objectively reasonable person may have known or believed.” Here, the court determined that Sigma’s knowledge was the focus and that there was sufficient record evidence to demonstrate that Sigma acted with either deliberate ignorance or reckless disregard when it declared on the import customs forms that it did not “owe antidumping duties on its welded outlets.”