9th Circuit 'Unlikely' to Revisit Decision Finding Customs FCA Cases Belong at CIT, Law Firm Says
The U.S. Court of Appeals for the 9th Circuit is "unlikely" to revisit its 2004 decision finding that False Claims Act qui tam cases involving customs duty avoidance belong at the Court of International Trade, law firm Morgan Lewis said in a Feb. 23 blog post. Overturning the decision would require an en banc ruling from the court, something that does not seem probable given that it is a whistleblower action in which the government hasn't intervened, the post said.
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However, Morgan Lewis added that the court will likely decide whether to extend its 2004 holding to FCA customs cases started by relators and make a ruling on an issue that has "received little attention in the last 20 years."
In the suit, the relator, Island Industries, alleged that competitors, including Sigma Corp., violated the FCA by failing to pay antidumping duties on pipe fitting imports. The U.S. District Court for the Central District of California ordered Sigma to pay $26 million for the violations -- $8 million in damages in addition to statutory penalties. The importer appealed the action to the 9th Circuit, where it is currently being litigated (Island Industries v. Sigma Corp., 9th Cir. # 22-55063).
One of the central questions in the case, whether district courts have jurisdiction to hear customs-related FCA matters, hinges on how the appellate court reads its 2004 decision in U.S. v. Universal Fruits and Vegetables Corp. In that decision, the 9th Circuit said that district courts do not have jurisdiction over these types of FCA cases since CIT has exclusive jurisdiction. Sigma is arguing that Universal Fruits should apply to qui tam FCA customs cases (i.e., cases brought by whistleblower).
The U.S., meanwhile, claims that the decision is "wrongly decided" but acknowledges that only an en banc court can reverse the holding. As a result, the government says the appellate court should limit the opinion to affirmative FCA proceedings commenced by the U.S. Both Island Industries and the government note that, when Universal Fruits got to CIT, the trade court dismissed the case after finding it had no jurisdiction over FCA cases. The Federal Circuit never addressed the issue on appeal. The question lingers as to whether any federal court can hear customs-related FCA cases or if the government can only pursue remedy under customs law at CIT, Morgan Lewis said.
"It is somewhat surprising that the Universal Fruits holding has not been frequently raised as a jurisdictional defense in FCA cases, especially in the Ninth Circuit," the blog post said. "While the appellate court in Sigma could bypass the question by finding that Universal Fruits does not apply to qui tam cases, it is possible it will issue a decision that could have enormous consequences for FCA cases in this area. ...
"Because the Ninth Circuit’s Universal Fruits holding has not been addressed by any other circuit courts, defendants facing FCA suits based on customs violations should consider raising it as a defense."