Opinion
93 Civ. 4492 (PKL) (JCF), 93 Civ. 4494 (PKL) (JCF).
May 17, 2005
MEMORANDUM AND ORDER
The plaintiff, BOUSA Inc. ("BOUSA"), formerly known as Bulk Oil (USA) Inc., brings this action seeking the reclassification of petroleum products that it imported into this country and which it contends the United States Customs Service (the "Customs Service") misclassified for purposes of imposing tariffs. BOUSA moves pursuant to Rule 15 of the Federal Rules of Civil Procedure to amend its complaint to add two shipments to the eleven that are currently at issue in this litigation. Because the proposed amendment would be futile, BOUSA's motion is denied.
Background
The factual background of this case is straightforward; the procedural history is not. BOUSA alleges that between 1985 and 1986, it imported eleven shipments of petroleum products into this country from Brazil and Romania. (Adversary Complaint ("Compl."), ¶¶ 6, 9). BOUSA contends that these shipments consisted of "unleaded gasoline blendstock": a petroleum product that is processed into low octane motor fuel. At that time, gasoline blendstock was subject to a duty of $.0025 per gallon pursuant to the Tariff Schedules of the United States, 19 U.S.C. § 1202, item 475.65. (Compl., ¶¶ 9, 23, 32, 33, 47). The Customs Service, however, determined that the shipments were properly classified as motor fuel under item 475.25 of the Tariff Schedules of the United States, and therefore subject to a duty of $.0125 per gallon. (Compl., ¶¶ 15, 47).
These shipments are identified by the following entry numbers: 1001-85-402331-4, 1001-85-402332-7, 1001-85-402365-7, 1001-86-152704-9, 1001-86-152844-6, 1001-86-240394-2, 1001-86-240442-0, 1001-86-240476-3, 1001-86-312404-2, 4602-86-101172-0, and 4602-86-101202-0.
The Customs Service then "liquidated" these shipments; that is, it made a final computation of the duties owing based on its classification of the goods. 19 C.F.R. § 159.1. It issued a bill to BOUSA for the difference between that amount and the duties that BOUSA had already paid. (Compl., ¶ 7). In response, BOUSA filed protests with the Customs Service, challenging the classification of the shipments as motor fuel, but these protests were denied on June 15, 1990. (Compl., ¶¶ 7, 8).
In the meantime, on December 29, 1989, BOUSA filed a petition for reorganization in the United States Bankruptcy Court for the Southern District of New York under Chapter 11 of the Bankruptcy Code. (Compl., ¶ 1).
On December 12, 1990, BOUSA filed two actions in the Court of International Trade (the "CIT"), both entitled BOUSA Inc. v. United States, with docket numbers 90-12-00657 and 90-12-00658. In these actions, BOUSA contested the tariff classification of various shipments, including the eleven at issue here. (Declaration of John J. Mahon dated Nov. 8, 1995 ("Mahon Decl."), attached to Notice of Motion dated Feb. 26, 1996, ¶ 3; Compl. ¶ 8). The Customs Service moved to dismiss action number 90-22-00657 and seven of the claims asserted in action number 90-12-0658 for lack of jurisdiction because BOUSA had not paid the liquidated duties on those shipments, a prerequisite to suit under 28 U.S.C. § 2637(a). (Mahon Decl. ¶ 5). The CIT granted these motions on March 10 and 15, 1993. (Mahon Decl., ¶ 6).
On April 9 and 14, 1993, BOUSA moved pursuant to 28 U.S.C. § 1631 for rehearing and to transfer the cases to the United States District Court for the Southern District of New York for referral to the Bankruptcy Court. (Mahon Decl., ¶ 7). The CIT granted these motions and transferred the actions, which were assigned docket numbers 93 Civ. 4492 and 93 Civ. 4494. The actions were subsequently referred to the Bankruptcy Court. BOUSA then filed the instant motion to amend its complaint, and the Customs Service moved for an order withdrawing the reference to the Bankruptcy Court. The latter motion was granted on May 14, 1997, after which the case was placed on the suspense calendar while the parties awaited a decision from the CIT that would resolve certain key issues. After that decision was rendered, the case was restored to the active docket, and BOUSA's motion to amend is now ripe for decision.
BOUSA seeks to amend its complaint to include two shipments that were not addressed in the current action. They are identified by entry numbers 86-288030-3 and 85-361848-7. The plaintiff alleges that the former shipment consisted of gasoline blendstock, while the latter consisted of kerosene. (Affidavit of Herbert Peter Larsen dated Nov. 7, 1996 ("Larsen Aff."), ¶¶ 8, 9; Proposed Amended Complaint ("Am. Compl."), ¶¶ 9, 52, 55). BOUSA protested the classification by the Customs Service of both shipments as motor fuel. (Larsen Aff., ¶¶ 11, 12; Am. Compl., ¶¶ 7, 53). The protests were denied, and BOUSA filed civil actions in the CIT contesting those decisions. (Larsen Aff., ¶¶ 13, 14; Am. Compl., ¶¶ 8, 54). At the time that it filed those actions, BOUSA had not paid liquidated duties on either shipment (Declaration of Karen Binder dated Jan. 10, 1997 ("Binder Decl."), ¶¶ 2, 3), and the CIT dismissed both actions for failure to prosecute. (Declaration of John J. Mahon dated Jan. 10, 1997 ("Second Mahon Decl."), attached to Defendant's Memorandum of Law in Opposition to Plaintiff's Motion to Amend the Complaint, Exhs. A, B).
Discussion
A motion to amend is governed by Rule 15(a) of the Federal Rules of Civil Procedure, which states that leave to amend "shall be freely given when justice so requires." Fed.R.Civ.P. 15(a);see Oneida Indian Nation of New York v. City of Sherrill, New York, 337 F.3d 139, 168 (2d Cir. 2003), rev'd on other grounds, ___ U.S. ___, 125 S. Ct. 1478 (2005). Notwithstanding the liberality of the general rule, "it is within the sound discretion of the court whether to grant leave to amend," John Hancock Mutual Life Insurance Co. v. Amerford International Corp., 22 F.3d 458, 462 (2d Cir. 1994) (citation omitted), and for the proper reasons, a court may deny permission to amend in whole or in part. See Krumme v. WestPoint Stevens Inc., 143 F.3d 71, 88 (2d Cir. 1998). In discussing the use of this discretion, the Supreme Court has stated:
In the absence of any apparent or declared reason — such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc. — the leave sought should . . . be "freely given."Foman v. Davis, 371 U.S. 178, 182 (1962).
Here, the defendant argues that the plaintiff's proposed amendments should be denied as futile because the statute of limitations has run with respect to the two shipments at issue. A motion to amend may be denied on this ground if the amendment could not withstand a motion to dismiss. See Oneida Indian Nation, 337 F.3d at 168; Milanese v. Rust-Oleum Corp., 244 F.3d 104, 110 (2d Cir. 2001); Smith v. CPC International, Inc., 104 F. Supp. 2d 272, 274 (S.D.N.Y. 2000). Where claims are barred by the statute of limitations, they are subject to dismissal, and an amendment to add such claims is therefore futile. see Malesko v. Correctional Services Corp., 229 F.3d 374, 383-84 (2d Cir. 2000), rev'd on other grounds, 534 U.S. 61 (2001);Smith v. P.O. Canine Dog Chas, No. 02 Civ. 6240, 2004 WL 2202564, at *15 (S.D.N.Y. Sept. 28, 2004); de la Fuente v. DCI Telecommunications, Inc., 206 F.R.D. 369, 387 (S.D.N.Y. 2002).
A decision of the Customs Service concerning the "classification and rate and amount of duties chargeable" or the "liquidation or reliquidation of an entry" is conclusive "unless a civil action contesting the denial of a protest, in whole or in part, is commenced in the United States Court of International Trade in accordance with chapter 169 of Title 28 within the time prescribed by section 2636 of that title." 19 U.S.C. § 1514(a). The referenced section, in turn, requires that such a civil action be commenced within 180 days of the date of mailing of the Custom Service's denial of the protest. 28 U.S.C. § 2636.
However, before a civil action may be commenced, the aggrieved party must meet the jurisdictional requirements for proceeding in the CIT, including payment of all liquidated duties.
A civil action contesting the denial of a protest under section 515 of the Tariff Act of 1930 may be commenced in the Court of International Trade only if all liquidated duties, charges, or exactions have been paid at the time the action is commenced[.]28 U.S.C. § 2637(a). See Nature's Farm Products, Inc. v. United States, 819 F.2d 1127, 1128 (Fed. Cir. 1987). This requirement is strictly enforced. See Libas, Ltd. v. United States, 217 F. Supp. 2d 1289, 1290 (Ct. Int'l Trade 2002);Dazzle Manufacturing, Ltd. v. United States, 971 F. Supp. 594, 595-96 (Ct. Int'l Trade 1997). In this case, the Customs Service denied BOUSA's protests on entry numbers 86-288030-3 and 85-361848-7 on May 25, 1990 and February 16, 1990, respectively. (Am. Compl., ¶¶ 8, 54). Accordingly, the 180-day statute of limitations for commencing an action in the CIT ran on November 21, 1990 and August 15, 1990, respectively. Yet, when BOUSA filed a civil action in the CIT on November 21, 1990 challenging the denial of its protest with respect to entry number 86-288030-3, it still owed $115,626.41 in liquidated duties on that shipment, and by January 10, 1997 it still had not made payment. (Binder Decl., ¶¶ 3, 4). Likewise, when BOUSA filed its action in the CIT on August 14, 1990 contesting the denial of its protest regarding entry number 85-361848-7, it still owed $72,563.79 in liquidated duties on that shipment, and it had not paid that amount by January 10, 1997. (Binder Decl., ¶¶ 2, 4). Thus, BOUSA did not commence an action in the CIT within the 180-day limitations period, because it did not fulfill the jurisdictional prerequisite.
However, since BOUSA was in bankruptcy, the limitations period was extended. Section 108(a) of the Bankruptcy Code provides in pertinent part:
If applicable nonbankruptcy law . . . fixes a period within which the debtor may commence an action, and such period has not expired before the date of the filing of the petition, the trustee may commence such action only before the later of —
(1) the end of such period . . .; or
(2) two years after the order for relief.
11 U.S.C. § 108(a). BOUSA, as debtor-in-possession, had the same rights as a trustee to avail itself of this provision. 11 U.S.C. § 1107(a). The "applicable nonbankruptcy law" was 19 U.S.C. § 2636, which establishes the 180-day limitations period. The "order for relief" was the date on which BOUSA filed its voluntary petition for bankruptcy, that is, December 29, 1989. 11 U.S.C. § 102(6); TLI, Inc. v. United States, 100 F.3d 424, 426-27 (5th Cir. 1996). Therefore, BOUSA had until December 29, 1991 to pay liquidated duties and commence an action challenging the Customs Service's denial of its protests. It failed to do so.
Nevertheless, BOUSA argues that the limitations period did not, in fact, begin to run when the Customs Service denied its protests because that action by the Customs Service violated the automatic stay provisions of the Bankruptcy Code. (Larsen Aff., ¶ 13). The filing of a petition in bankruptcy "operates as a stay, applicable to all entities, of — (1) the commencement or continuation. . . . of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under [the Bankruptcy Code]." 11 U.S.C. § 362(a). This provision "affords debtors a `breathing spell' from the collection process and enables them to attempt a repayment or reorganization plan to satisfy existing debt." Eastern Refractories Co. v. Forty Eight Insulations Inc., 157 F.3d 169, 172 (2d Cir. 1998) (quoting In re Siciliano, 13 F.3d 748, 750 (3d Cir. 1994)). However, it only applies to claims "against the debtor," that is, claims where the debtor is in a defensive posture. To the extent that the debtor has itself brought the claim, the automatic stay provision does not preclude adjudication. See Koolik v. Markowitz, 40 F.3d 567, 568 (2d Cir. 1994); Carley Capital Group v. Fireman's Fund Insurance Co., 889 F.2d 1126, 1127 (D.C. Cir. 1989); In re Berry Estates, Inc., 812 F.2d 67, 71 (2d Cir. 1987);Vitranschart, Inc. v. Levy, No. 00 Civ. 3618, 2000 WL 1239081, at *5 (S.D.N.Y. Aug. 31, 2000); Justus v. Financial News Network Inc., 158 B.R. 570, 573 (S.D.N.Y. 1993).
Here, BOUSA's obligation to pay liquidated duties arose prior to its filing of a bankruptcy petition, and that obligation existed independent of any protest proceedings. See United States v. Ataka America, Inc., 826 F. Supp. 495, 503 (Ct. Int'l Trade 1993). Therefore, the denial of any protest was not an action "to collect, recover, or offset" a debt. Nor did it threaten to reduce the assets available to the debtor. Rather, it was simply an adverse determination with respect to BOUSA's efforts to alter a preexisting obligation. As such, it was not subject to the automatic stay. Consequently, the statute of limitations ran with respect to the claims that BOUSA now seeks to add, and those claims are therefore futile.
Conclusion
For the reasons discussed above, BOUSA's motion to amend its complaint is denied.
SO ORDERED.