Nitek and the Penalty Process

Etiketler : Compliance Court Decision Customs Law Enforcement
There is a lot on my plate at the moment, but I want to be sure to squeeze this in for you. There goes my lunch-time walk up Michigan Avenue.

United States v. Nitek Electronics is an important decision of the United States Court of Appeals for the Federal Circuit. Go read it. The gist is all you will get from me today.

The gist is that when the United States commences a penalty action in the United States Court of International Trade, the point of the action is to collect on the same penalty claim Customs and Border Protection asserted in the administrative process. In Nitek, Customs' claim was based on a finding that the importer had acted with gross negligence. When Justice filed the case in the CIT, it asserted that the violation occurred as a result of (un-gross) negligence. Nitek moved to dismiss on the grounds that Customs never made a claim based on negligence and, therefore, that claim was not properly before the Court. The CIT agreed and dismissed the case.

On basically the same reasoning, the Court of Appeals has affirmed.

The reason this is important is that it means that Customs' administrative process limits the Justice Department's ability to define the case against the defendant. In the old days, it was generally understood that once Customs imposed a penalty, DOJ could handle it any way it wanted in Court. That is no longer true, if it ever was.

Nitek is consistent with a prior case called Optrex in which the Court said that Justice may not amend a complaint to assert a higher level of culpability than was contained in Customs' penalty claim. There, the Court of International Trade found the lack of notice concerning the higher potential penalties and the different facts that must be proven precluded pursing an elevated penalty in Court.

This case is different because Justice asserted a lower level of culpability in Court. When challenged, it analogized to the criminal law concept of the lesser included offense. Under that doctrine, if I kill a man I can be charged with murder as well as manslaughter because manslaughter requires all the same facts as murder. To prove murder, the prosecutor will need to show the additional aggravating factor of premeditation (or whatever it is they say on Law & Order). In Nitek, the CAFC refused to accept the analogy and said there is no such thing as a lesser included offense in customs penalty cases.

This might have a lasting impact on the practice. Initially, I expect Customs to be much more scrupulous about detailing the facts and conclusions at each level of culpability that may apply. This is effectively administrative pleading in the alternative to preserve the alternatives for later litigation. But, administratively, Customs cannot try and collect in the alternative. At some point, it makes a claim and that claim demands that the allegedly liable party pay one amount as a penalty for some specific set of facts. It is possible that the alternative pleading will merge into the final "bill" Customs put to the defendant. That remains to be see.