[00:00:08] Speaker 02: Our first case for today is 2016-1088, the United States versus American Home Assurance Company. [00:00:18] Speaker 02: Ms. [00:00:18] Speaker 02: Farrell, please proceed when you're ready. [00:00:39] Speaker 01: The trial court erred as a matter of law when it found that the United States was not entitled to equitable interest, notwithstanding the fact that it had found that the balancing of the equities actually found in favor of the United States, but that instead the award of interest under Section 580 would more than compensate the government. [00:01:03] Speaker 01: Why the trial court erred as a matter of law is because Section 580 is not about compensatory interest. [00:01:10] Speaker 01: It's not about making a person whole. [00:01:12] Speaker 01: It's about preventing sureties from refusing to pay on their obligations and forcing the United States to actually bring a collection action. [00:01:23] Speaker 01: The United States should never have to be a plaintiff in a collection action against the surety for whom the Department of Treasury has actually extended [00:01:32] Speaker 01: the ability for that surety to issue customs bonds, maritime bonds. [00:01:37] Speaker 03: If we were just to look at the plain language of the statute, it says interest, right? [00:01:42] Speaker 01: Yes, Your Honor. [00:01:43] Speaker 03: And, you know, we haven't done a true statutory treatment, but we've had a number of cases that have referred to 580 as prejudgment interest. [00:01:53] Speaker 01: Yes, Your Honor. [00:01:53] Speaker 03: But now you want us to think of it as not as interest, but as a penalty. [00:01:59] Speaker 01: Well, I want the court to think of it, Your Honor, as interest. [00:02:02] Speaker 01: Still, yes, because that is, as Your Honor points out, that is the plain language of that provision. [00:02:08] Speaker 01: But that provision also has additional language that kind of calls into question the compensatory construct, because it talks about only interest at 6% rate. [00:02:19] Speaker 01: So when you place an actual rate of interest, you preclude the ability for that [00:02:24] Speaker 01: provision to actually provide compensatory interest. [00:02:28] Speaker 01: Compensatory interest. [00:02:29] Speaker 02: Are you then suggesting there are many, many, many statutes across various areas of law where they actually have a set interest rate? [00:02:37] Speaker 02: Are you saying that in all of those statutes where the interest rate is set, those would all be treated as penalties and therefore not interest solely because [00:02:45] Speaker 02: The rate is set in those statutes? [00:02:48] Speaker 01: Your Honor, I don't believe that that would be true. [00:02:51] Speaker 01: I don't know what those statutes would be, but what makes this particular provision unique is that it hinges, it pivots on the United States actually bringing, being forced to bring in action to recover duties from a surety who's made a promise to the United States to pay on demand. [00:03:08] Speaker 01: Congress, as this court has recognized in Hartford, Congress recognized that 1581A [00:03:14] Speaker 01: is the proper approach for anyone who wants to be heard. [00:03:18] Speaker 01: If you think customs has made a decision that's inappropriate or incorrect, you bring it through a 1581A action. [00:03:25] Speaker 01: Here what you have is a surety who surely could have brought a 1581A action. [00:03:30] Speaker 01: It brought a protest and chose not to bring an action. [00:03:33] Speaker 01: It sat back on its rights. [00:03:35] Speaker 01: It then [00:03:36] Speaker 01: triggered the United States into actually having to bring litigation against it. [00:03:40] Speaker 04: Am I remembering right that this originated in a, what is it, a 1799 statute and it was part and parcel of I think a provision or went hand in glove with a provision that maybe doesn't exist anymore that expressly said the United States can sue on a bond so that [00:04:04] Speaker 04: At the time it was enacted, it looked like a perfectly ordinary, you can sue the United States and when you sue, you get 6%. [00:04:13] Speaker 04: And 6% was a pretty darn standard, more or less inflation equaling rate in 1799. [00:04:22] Speaker 04: Why doesn't all of that suggest when 6% is compensatory, there's no need for more? [00:04:31] Speaker 01: Well, Your Honor, because 6% can never be compensatory. [00:04:34] Speaker 04: Sure it can. [00:04:37] Speaker 04: Right now, it's plenty compensatory. [00:04:40] Speaker 04: The value of money is nowhere near 6%. [00:04:43] Speaker 01: Absolutely, Your Honor, and that's the very point. [00:04:45] Speaker 01: It would be overcompensating. [00:04:48] Speaker 04: I meant, of course, at least compensatory, more than compensatory. [00:04:54] Speaker 01: If one were to look at it as being a compensatory statute. [00:04:57] Speaker 01: But I believe that the reason we don't see that as compensatory is for the reason that your honor is bringing out from the fact that there's a 6%. [00:05:06] Speaker 01: At times, 6% will be over compensatory. [00:05:09] Speaker 02: But again, this feels like an argument that any time Congress sets out interest and mandates a statutory amount, the minute that statutory amount is inconsistent with the rate of inflation, according to you, that statute is now a penalty statute and no longer a compensatory statute. [00:05:25] Speaker 02: That doesn't work very well for me. [00:05:27] Speaker 01: Your Honor, I don't know those provisions, but I can't say with specificity. [00:05:33] Speaker 01: But if those provisions said that the United States had afforded a right to the person who is going to be the subject of that provision, afforded them a right to make premiums, to earn profit, because the United States extended the right for them to issue bonds in federal courts for appeals, for bail bonds, for maritime, for customs. [00:05:53] Speaker 01: The fact that you've given them a business extended them an opportunity for business. [00:05:58] Speaker 01: Part and parcel of that was when we call in the bond, you pay it on demand. [00:06:03] Speaker 01: And if you think we're wrong about calling in that bond, this court has said time and again, the best way, the way Congress wants the structure of the statute is for that surety to then bring a protest. [00:06:15] Speaker 01: And if they lose that protest, to then bring a 1581A action. [00:06:19] Speaker 01: in this case in the Court of International Trade. [00:06:22] Speaker 01: So if there were a statute that said the United States would be forced to then go to all the trouble of bringing litigation against the party for whom it was expecting the revenue to be protected. [00:06:33] Speaker 01: The public fisc is supposed to be protected by the surety. [00:06:35] Speaker 01: The surety has sat back for over a decade and refused to pay, notwithstanding the fact that they conceded liability under the bond itself. [00:06:44] Speaker 02: Do you believe that the lower court didn't have the authority [00:06:48] Speaker 02: to decide that equitable interest was inappropriate in this case in light of the amount of compensation the government was already receiving? [00:06:57] Speaker 01: We believe that the trial court below has complete discretion on whether or not to award equitable interest, because that is a court-ordained concept. [00:07:07] Speaker 01: Our problem with what the court said in its opinion was that because 580 compensated you. [00:07:16] Speaker 01: And our position is that 580 doesn't compensate. [00:07:18] Speaker 01: If you don't want to award equitable interest because you don't think we deserve it, that's one thing. [00:07:23] Speaker 01: That's within the abusive discretion of the trial court. [00:07:25] Speaker 02: Well, what the court didn't say was you can never have equitable interest because of the presence of 580. [00:07:32] Speaker 02: So clearly the judge was not looking at it as 580 is meant to be the exclusive form of compensation for the government. [00:07:40] Speaker 02: So clearly this court left open the possibility of equitable interest despite a 580 award. [00:07:45] Speaker 01: Right, Your Honor. [00:07:47] Speaker 02: In that respect, but it seems... But once you know that that's the way that judge, he, decided the case, then doesn't it seem like a very case-specific decision that equitable interest is not to be awarded in this case? [00:08:02] Speaker 02: If we understand that the judge recognized and allowed for the possibility of equitable interest to be awarded alongside of 580 interest, then it doesn't seem like a big [00:08:11] Speaker 02: ruling of law, it seems like more like a case-specific decision about whether equitable interest is appropriate in this case. [00:08:18] Speaker 01: Well, I think that whether or not equitable interest would be appropriate is separate and apart from 580. [00:08:22] Speaker 01: 580 is its own interest. [00:08:25] Speaker 01: This court has said that we balance the equities. [00:08:27] Speaker 01: So equitable interest at the trial court level requires a balancing of the equities. [00:08:31] Speaker 01: So it may be that you decide at the trial court level, the equities don't warrant it. [00:08:36] Speaker 01: But the trial court may also have been [00:08:38] Speaker 01: kind of telegraphing. [00:08:40] Speaker 04: I thought your position is that the better view of the law of prejudgment interest is that you don't do a lot of equitable balancing. [00:08:49] Speaker 04: You just look at what's necessary to make you whole, which happens to be the one thing that the judge in this case talked about. [00:08:58] Speaker 01: Yes, Your Honor. [00:08:59] Speaker 01: Our position is that many circuit courts in the United States, and also the Supreme Court as well in the West Virginia case, concluded that [00:09:08] Speaker 01: Equitable interest if someone's if there's no question that money is doing only you if you are without it Until you get it during that time period you should be getting interest running and this interest will run compound interest because that's how you know that type of interest runs and That that at the time when you do finally get paid based on the time value of money you should be placed back into the position you [00:09:32] Speaker 01: You should have been at the time the money was actually due in owing and all this time period needs to run interest to make you whole. [00:09:40] Speaker 01: So yes, our position is that there shouldn't be a balancing of the equities because if the money's due in owing and when you get paid 10, 20 years late, you should get interest and you're made whole. [00:09:51] Speaker 01: That's our position. [00:09:52] Speaker 04: But the judge in this case said you were made whole here. [00:09:55] Speaker 04: So maybe if this were 1979 or 1980 again, you'd get some more, but not now. [00:10:01] Speaker 01: Well, if 580 were a provision to make us whole, the trial court would be correct. [00:10:06] Speaker 01: And that's where we differ with the trial court's opinion. [00:10:09] Speaker 01: The trial court seems to believe that 580 is a compensatory provision. [00:10:15] Speaker 01: We do not believe it's a compensatory provision. [00:10:17] Speaker 01: We believe it's a provision that's meant to work as a deterrent. [00:10:20] Speaker 01: That assurity says, well, if I don't pay, I know I will definitely be hit with 6% interest [00:10:28] Speaker 01: under 580, no matter what. [00:10:30] Speaker 04: It does work as a deterrent when 6% is substantially above market rate. [00:10:36] Speaker 01: That may be true, Your Honor, but when we're engaging in contracts, we don't know at the time of the contract what the interest rate may be. [00:10:45] Speaker 01: Inflation can take over quickly. [00:10:47] Speaker 01: I mean, Venezuela is a perfect example of that. [00:10:50] Speaker 01: Something can happen. [00:10:50] Speaker 02: But then you would be able to petition the court, as you did here, for equitable interest on top of the 580 interest. [00:10:58] Speaker 01: we would have sought equitable interest anyway, because 580 interest is a separate, for our purposes, it's a separate concept that doesn't deal with compensating people. [00:11:11] Speaker 01: The fact that it is set at 6% means any given day you're overcompensating or undercompensating. [00:11:18] Speaker 01: And along with that, Your Honors, when Congress designed this statute, and as the court noted, this was, this provision, [00:11:25] Speaker 01: did start out in 1799. [00:11:27] Speaker 01: It was then reenacted in 1873, and it was moved from a judiciary provision in 1948 into the customs provision again. [00:11:39] Speaker 01: So as late as 1948, Congress has viewed this statute, even in moving it. [00:11:45] Speaker 01: So if it decided that it wanted something different, that it wanted to put in a compensatory construct, it could have built into it the same language that's used in 1505D. [00:11:56] Speaker 01: which is 1505D interest, which runs on the importer's duties that are owing and the fees and charges. [00:12:02] Speaker 01: When they don't pay, that rate runs at the treasury rate. [00:12:07] Speaker 01: So you now have Congress designing a system that has 1505D interest that's running at the treasury rate, the normal rate, what you would expect for when you're figuring out the time value of money. [00:12:20] Speaker 01: And then you also have simultaneously running [00:12:23] Speaker 01: 580 interest. [00:12:24] Speaker 01: So if customs has a bond that's larger than the duties that were due by the importer, there is room in that bond for the importer doesn't pay, because that's what's going to trigger the bond being due. [00:12:37] Speaker 01: There's room in that bond for that 580 interest to come to the surface or come to the cap of the bond, the face amount of the bond. [00:12:46] Speaker 01: So the fact that that exists in the world. [00:12:50] Speaker 02: But isn't it true that the 580 interest, since it is a statutory [00:12:53] Speaker 02: grant and not under the bond is not capped at the bond amount. [00:12:58] Speaker 02: It seems to be accepted by all the parties here that 580 interest given that it is a statutory right can be [00:13:06] Speaker 02: can be allowed to exceed the bond limit, and they're still on the hook for it. [00:13:10] Speaker 01: Oh, yes, Your Honor, absolutely. [00:13:11] Speaker 01: It is on top of whatever was due with respect to the bond. [00:13:16] Speaker 01: The point I'm trying to make, perhaps inarticulately, is that 1505D interest exists, and that is truly compensatory. [00:13:24] Speaker 01: There's no question when you read how it's calculated. [00:13:27] Speaker 01: It runs on a failure to pay, and you're compensating for not having turned over that money because you failed to pay. [00:13:34] Speaker 01: Simultaneously, with this running a 1505D interest, Congress also has another provision, also in Title 19, which is 580. [00:13:43] Speaker 02: You're into your rebuttal time. [00:13:45] Speaker 02: Would you like to save it? [00:13:46] Speaker 02: Yes, Your Honor. [00:13:46] Speaker 01: Thank you very much. [00:13:47] Speaker 04: There are a couple of issues that may be discussed. [00:13:50] Speaker 01: Thank you, Your Honors. [00:13:59] Speaker 00: May it please the Court, I'm Herb Shelley. [00:14:01] Speaker 00: I'm representing our home insurance in this case. [00:14:04] Speaker 00: With regard to 580 interest, I think it's pretty clear that this interest is clear on its face in the statute. [00:14:15] Speaker 00: It's been applied as interest. [00:14:17] Speaker 00: It's a statutory interest provision. [00:14:19] Speaker 00: The lower court, in determining whether to apply equitable interest in addition to it, used its equitable powers to examine the situation and the compensation that the government receives from having received [00:14:34] Speaker 00: would receive a 6% interest and made a determination that that amount more than compensated the government for any interest due because of the bonds at issue. [00:14:47] Speaker 00: It determined there was no reason to, based on the equities, provide additional interest. [00:14:54] Speaker 00: And there is nothing in the statute that indicates that this was enacted as a penalty interest in 1799. [00:15:03] Speaker 00: The statutory [00:15:04] Speaker 00: interest rates for government lending money to bondholders. [00:15:08] Speaker 00: And in other actions involving the government in 1799, 6% was the number used. [00:15:15] Speaker 00: There was no penalty provision added on top of it. [00:15:19] Speaker 00: So it's our view that the court, on this issue of equitable interest, did not err. [00:15:24] Speaker 00: And its determination is supportable because of its authority. [00:15:31] Speaker 00: There are additional interest issues, though, that do affect, and I think the court did error. [00:15:38] Speaker 00: One of them is the issue of whether 1505 interest applies to these two bonds in challenging bonds. [00:15:48] Speaker 00: The first error was that American Home was required to file a protest, and when the protest was denied, appeal the protest under 19 USC 1514. [00:16:02] Speaker 00: That is not applicable to assurity. [00:16:04] Speaker 00: Assurity, it's a bond contract, and assurity has the right to write. [00:16:08] Speaker 04: But that waiver basis for the CIT's ruling on that would be immaterial if we thought that 1505 does, in fact, apply to this. [00:16:18] Speaker 00: It would, if you did. [00:16:19] Speaker 00: But we were not allowed to actually litigate. [00:16:22] Speaker 00: We were able to litigate it, but the court did not rule on whether 1505 is applicable. [00:16:28] Speaker 04: But you litigated that here on the merits. [00:16:32] Speaker 00: We can't do that here. [00:16:33] Speaker 00: No, you did do it. [00:16:34] Speaker 00: We did, but there was no decision made on that issue. [00:16:37] Speaker 00: It was remanded back to the CIT. [00:16:39] Speaker 04: I'm sorry. [00:16:40] Speaker 04: In this Court of Appeals, you filed, you made your legal arguments. [00:16:45] Speaker 00: No decision has been issued on it except for the CIT decision because of the remand. [00:16:50] Speaker 00: And we believe that the question of interest on a bond, challenging by the government, is applicable to the [00:17:02] Speaker 00: be determined under the contract law for bonds, and that 1514 does not apply to the ability of the government to sue the insurer. [00:17:16] Speaker 03: Does Cherry Hill block you from making that argument? [00:17:20] Speaker 00: Cherry Hill does not. [00:17:34] Speaker 00: In Sherry Hill, the decision was based on whether customs can make decision involving liquidation of entrance. [00:17:43] Speaker 00: It was a liquidation case. [00:17:45] Speaker 00: It was not a question of illegal fraud that customs was trying to appeal. [00:17:50] Speaker 00: It recognized. [00:17:53] Speaker 00: Assurity was involved, right? [00:17:54] Speaker 00: Pardon me? [00:17:55] Speaker 00: Assurity was involved? [00:17:55] Speaker 00: Assurity was involved, but Congress didn't authorize customs [00:18:03] Speaker 00: make decisions on whether fraud existed. [00:18:05] Speaker 00: It makes decisions on whether the liquidation process was appropriate. [00:18:11] Speaker 00: And there was no fraud involved and no appeal of that in Cherry Hill. [00:18:20] Speaker 00: The charity in Cherry Hill was not making, there were no determinations made under 1514. [00:18:31] Speaker 00: that the surety took place. [00:18:34] Speaker 03: The surety should... Is there anything in 1514, the language of the statute, that creates the distinction between the surety situation in Cherry Hill and the surety situation we have in front of us? [00:18:46] Speaker 00: Well, 1514 is a statute in which all the elements determining the liquidation process can be challenged, whether the amount of duties that customs determines are due are correct, whether there are any proprieties in the entry process, [00:19:02] Speaker 00: all issues that pertain to the actual liquidation of entries. [00:19:05] Speaker 00: The surety is not involved in that process. [00:19:08] Speaker 00: The surety only gets involved in the process subsequently when the importer defaults on the amounts of duties due. [00:19:15] Speaker 00: So the surety aspect comes in later. [00:19:20] Speaker 00: And the proper way for the surety to be, if the surety doesn't pay the bond then, the proper way for it to be addressed is to eventually file a collection action [00:19:32] Speaker 00: against the surety. [00:19:33] Speaker 00: The surety could be involved in 15, 14 liquidations if it wants to, in the liquidation process, determine the amount due. [00:19:41] Speaker 00: It's not involved in any other aspect of that process. [00:19:44] Speaker 00: Its liabilities come to fore after that, if the surety defaults on the bond and the government tries to collect from it. [00:19:55] Speaker 00: And when that happens, others should be. [00:19:57] Speaker 03: You did file a protest here, right? [00:20:01] Speaker 03: I mean, you had the right to file a protest, and you, in fact, did file a protest. [00:20:05] Speaker 00: Under 1514. [00:20:06] Speaker 00: We did file several protests here. [00:20:08] Speaker 00: And then you could have filed the CIT civil action. [00:20:13] Speaker 00: But there was no obligation for the surety to deposit the money's due when the protests were denied and then appeal the denial of the protest. [00:20:26] Speaker 00: A surety has the option under a surety law, a contract law, [00:20:30] Speaker 00: to wait until the government files an action against it and raises defenses at that time in that context, which is what was done here. [00:20:40] Speaker 00: 580, not 580, the surety law was put in the challenge for the lower court in this court to review surety decisions. [00:20:55] Speaker 00: In the Customs Court Act of 1980, at that time, all these [00:21:00] Speaker 00: assurity type issues on bonds were handled by district courts. [00:21:04] Speaker 00: The Customs Court Act of 1980 consolidated that authority into the CIT and this court. [00:21:10] Speaker 00: So there would be one set of courts that here's these cases. [00:21:15] Speaker 00: At that time, it was clear under the law that existed then that there was no obligation for assurity under contract law to do anything but wait until a suit was filed and raise its defenses against the suit [00:21:29] Speaker 00: in that action. [00:21:31] Speaker 00: That change in the Customs Court Act of 1980 to give the jurisdiction to these your courts did not change that provision. [00:21:41] Speaker 00: And in fact, it increased the rights of the surety by one, giving a specific statutory requirement, a legislative provision in 1582 to [00:21:59] Speaker 00: U.S.C. [00:22:01] Speaker 00: 1582 to allow the surety to protect itself and the government to sue under that provision. [00:22:09] Speaker 00: Customs does not have the right to sue the surety on these issues under 1514. [00:22:13] Speaker 00: Its authority to do that is under 1582. [00:22:18] Speaker 00: In addition, at the time of the Customs Act of 1880, [00:22:21] Speaker 00: It adds section 1583. [00:22:24] Speaker 04: And the 1582-2, is that what it is? [00:22:27] Speaker 04: And that's written in jurisdictional terms, right? [00:22:30] Speaker 04: And is that just understood to also be the cause of action for the government? [00:22:35] Speaker 00: It's the cause of action from the government to sue a surety for non-payment of a bond. [00:22:41] Speaker 04: Can I ask this question? [00:22:44] Speaker 04: There was some substantial amount of the government's demand that you all did not dispute, right? [00:22:52] Speaker 00: Yes, Your Honor. [00:22:53] Speaker 04: Was there a mechanism by which you could hand that money over to the government, say, it's not just kind of an escrow for you, it's yours, we know it's yours, we cede all claims to that money, reducing the amount of money on which the government would have to sue you so that it would be only over the disputed amounts, the result of which if [00:23:22] Speaker 04: there is such a process might be 580 and other interest would run only on the disputed amounts, not the amounts that was in their bank account. [00:23:32] Speaker 04: Is there a way that that works? [00:23:35] Speaker 04: I know you tried to do something like that here, maybe not so successfully because you conditioned it, but is there a way in which that could occur? [00:23:45] Speaker 00: Well, yes, there is. [00:23:46] Speaker 00: In fact, we did make that offer. [00:23:49] Speaker 00: We made an unofficial offer in 2010. [00:23:52] Speaker 00: to pay as a settlement, we pay offer to a smaller amount. [00:23:55] Speaker 02: But those are settlements. [00:23:56] Speaker 02: That's different. [00:23:57] Speaker 02: When you term it as a settlement, it's not an unconditional offer. [00:24:01] Speaker 02: Because you're saying, you waive your right to these other things, and we'll pay you this amount now. [00:24:05] Speaker 02: I mean, just Toronto's very precise question is important to me. [00:24:08] Speaker 02: And it's, could you have reduced your own penalty under 580 or interest under 580? [00:24:15] Speaker 02: Could you have limited your own liability by paying the undisputed amount? [00:24:20] Speaker 00: Well, after the unofficial offer, we filed a formal offering compromise under the custom statutes to which we attached full payment of the principal due, as cited in the complaints, which, if had been accepted, would have done what we're talking about here and left the interest litigation to go. [00:24:42] Speaker 02: That wasn't conditioned? [00:24:43] Speaker 00: The condition was we would pay the principal. [00:24:46] Speaker 00: The condition we didn't agree with was the condition customs put on it. [00:24:50] Speaker 00: Because they said they would not accept it unless, one, it included interest due, or two, at least the amount being offered, which is the principal amount claimed in the complaints. [00:25:03] Speaker 04: It would be allocated first to do interest. [00:25:07] Speaker 00: And yes, it can be. [00:25:08] Speaker 00: And so that was rejected. [00:25:11] Speaker 04: Does the government have to accept a check that you offer them to say, this money is yours? [00:25:18] Speaker 04: We'll figure out later. [00:25:20] Speaker 04: what remains in the dispute, but that money is yours. [00:25:24] Speaker 00: That's the precise offer we made in this case. [00:25:29] Speaker 00: When we followed rule 67, CIT rule 67 motion, the CIT to deposit in an account designated by the court, interest-bearing account, the amount we thought was due, and so that we could then litigate the amounts. [00:25:44] Speaker 00: Eventually the court denied that motion because, again, Customs wanted to apply [00:25:50] Speaker 00: the interest to principal first. [00:25:53] Speaker 00: But in a companion case, CIT 10343, in which it was part of these 403 consolidated cases, but it was handled separately because there was one substantive issue, $63,000 was the amount claimed before interest in that case. [00:26:15] Speaker 00: We offered, and the court accepted and the government accepted, [00:26:20] Speaker 00: $50,000 in place of the $63,000 that was requested to be used as the amount from which interest eventually would be calculated. [00:26:32] Speaker 00: So in this situation, this one situation, the court and customs actually accepted a specific offer. [00:26:38] Speaker 00: They did not do it in the other remaining cases. [00:26:41] Speaker 00: So that has been done and they could do it. [00:26:44] Speaker 00: It was a question of [00:26:46] Speaker 00: what they wanted to do. [00:26:47] Speaker 00: And in fact, that court was in litigation. [00:26:49] Speaker 00: That particular case was litigated separately. [00:26:51] Speaker 00: And the judge accepted that payment. [00:26:55] Speaker 02: You're running low on time. [00:26:57] Speaker 02: Would you like to address your issue about whether 580 interest should cover duties or duties plus 1505D interest? [00:27:05] Speaker 00: Yes. [00:27:05] Speaker 00: It should not cover. [00:27:07] Speaker 00: 580 is to be applied to interest, not to interest. [00:27:13] Speaker 02: No, you mean to be applied to duties, not to interest. [00:27:16] Speaker 00: You think you said the opposite of what you said. [00:27:20] Speaker 00: 580 will be applied, the 6% is applied to the amount due to collect the interest due. [00:27:29] Speaker 00: It should not, 1505, what the government wants is to include the 1505 interest they've calculated. [00:27:35] Speaker 00: In some of these cases, the bond is less than the amount due. [00:27:40] Speaker 00: up to the bond amount, they want to include 1505 interest. [00:27:43] Speaker 00: And so when you apply 580 interest on top of both of those, you're applying part of that as interest on interest. [00:27:50] Speaker 00: And so 580 is not just being applied to the principal that's due, it's also being applied to interest due. [00:27:57] Speaker 00: And we believe that that's not what 580 was designed for, and that it should not be calculated that way. [00:28:06] Speaker 00: Because it adds substantially to the amount [00:28:09] Speaker 00: do by including interest on interest. [00:28:12] Speaker 02: Even though the statute on 580 talks about upon all bonds, you don't think that the interest is on the bond amount that is due as opposed to the subparts of what make up the bond amount that's due? [00:28:29] Speaker 00: It might be, Your Honor, but we do not believe that 1505-D interest applies to any dumping cases. [00:28:34] Speaker 02: OK, but suppose that you don't prevail on that argument. [00:28:38] Speaker 00: It still should not apply because the interest should be applied. [00:28:41] Speaker 00: The 580-D interest should just be applied to the bond amount that's due, not to the bond amount plus interest and interest. [00:28:48] Speaker 02: But the bond amount can include interest, right? [00:28:51] Speaker 02: You just said that 1505-D interest can be on top of duties up to the bond amount. [00:28:58] Speaker 00: So the bond amount that's due could arguably include both. [00:29:03] Speaker 00: The amount due under the bond is say $140,000. [00:29:08] Speaker 00: The amount of dumping duties due may be $200,000. [00:29:12] Speaker 00: So that is that $140,000 up to $200,000 that 1505 interest is being included in. [00:29:19] Speaker 00: So it's not the bond amount due. [00:29:21] Speaker 00: The bond amount is a set number that's set for the bond. [00:29:24] Speaker 00: It's not the amount of duties due. [00:29:26] Speaker 02: I thought I misunderstood. [00:29:29] Speaker 02: I thought the 1505D interest can only be awarded if there's room above and beyond the duty amount up to the cap of the bond. [00:29:37] Speaker 00: That's true. [00:29:42] Speaker 00: But that amount plus the 1505D interest up to the cap does not include interest. [00:29:52] Speaker 00: The amount duties do are either less than the bond amount [00:29:55] Speaker 00: or up to the bottom about what the surety owes? [00:29:57] Speaker 02: We understand. [00:29:58] Speaker 02: I think we have your argument. [00:29:59] Speaker 02: Thank you. [00:30:01] Speaker 02: Let's have Ms. [00:30:02] Speaker 02: Farrell. [00:30:05] Speaker 02: We went over by about a minute with Mr. Shelley. [00:30:08] Speaker 02: So let's add one minute, please, to Ms. [00:30:10] Speaker 02: Farrell's rebuttal time so we can keep it even. [00:30:13] Speaker 02: Yeah, just give her three. [00:30:14] Speaker 02: That's perfect. [00:30:16] Speaker 01: Thank you, Your Honor. [00:30:18] Speaker 01: Your Honor, briefly, one issue that was just raised by AHAC was [00:30:24] Speaker 01: this 10-343 case, talking about whether or not the government can accept money. [00:30:29] Speaker 01: 10-343 was a unique scenario. [00:30:32] Speaker 01: As we had discussed earlier, for the most part, there was conceited liability under virtually every bond. [00:30:37] Speaker 04: Well, forget about the particular case. [00:30:39] Speaker 04: Can a surety that says, we know we owe you $8 million, we have a dispute with you over our remaining million. [00:30:51] Speaker 04: Here's $8 million. [00:30:53] Speaker 04: Let's see if we can work out the million. [00:30:56] Speaker 04: Maybe you have to sue them on the million. [00:30:59] Speaker 04: At which point the 580 interest would run on, and assuming you win the lawsuit, that you get your 580 and other interest on the million, but not on the eight. [00:31:09] Speaker 04: Is there a mechanism by which they can do that without your saying, no, we won't take it because we want the 580 to run on the nine? [00:31:18] Speaker 01: Your Honor, obviously we have to work with my client on that. [00:31:21] Speaker 01: My understanding was always that we would be willing to take money that didn't have strings attached. [00:31:27] Speaker 01: And then when the court decided the appropriate measures of interest, it would run on that amount of money that was not, you know, was left unpaid because, you know, it might be running out on it. [00:31:40] Speaker 02: I'm confused. [00:31:41] Speaker 02: Did Mr. Shelley misrepresent in some way the offers that were made in this case? [00:31:47] Speaker 02: Because he said the first offer was sort of conditional. [00:31:50] Speaker 02: on settlement, but the second offer wasn't. [00:31:52] Speaker 02: The second offer was, please, just take this money, which is sort of the anti-dumping duty amount owed, and let us just continue to contest what should be paid in interest. [00:32:03] Speaker 01: My recollection was that there were conditions on that money. [00:32:06] Speaker 03: Was the condition that it be directed solely to the principal? [00:32:09] Speaker 01: I think that that is my recollection. [00:32:12] Speaker 03: First, and then there are regulations that say, no, it has to [00:32:16] Speaker 03: pay off the interest first, and then if there's money left over, then you can start eating into the principal. [00:32:22] Speaker 01: Right. [00:32:22] Speaker 01: And I think that that, I mean, if you really, if you just step away from it, though, I mean, this court is clear in the Hartford case, the issues that can be raised by assurity are very broad. [00:32:36] Speaker 01: In fact, contractual issues, according to this court. [00:32:38] Speaker 02: Can you look at 580? [00:32:39] Speaker 02: Do you have it handy with you? [00:32:40] Speaker 02: Yes, I do, Your Honor. [00:32:41] Speaker 02: So what is the language that you rely on for why 580 should cover [00:32:46] Speaker 02: both duties and interest. [00:32:49] Speaker 02: Y580 interest, assume for a second I think it's interest, Y580 interest ought to cover not just duties but the 1505D interest that exists on top of the duties. [00:33:04] Speaker 01: Sure, Your Honor. [00:33:05] Speaker 01: And as Your Honor had mentioned earlier, this provision begins with the phrase, upon all bonds, and then next there's a comma, on which suits are brought for the recovery of duties. [00:33:16] Speaker 01: It just has to be a bond, and then it has to be a suit for those bonds for the recovery of duties. [00:33:23] Speaker 01: It doesn't say that we're limiting it to the recovery of duties. [00:33:26] Speaker 01: It just says that that litigation that's brought has to have something to do with the recovery of duties. [00:33:32] Speaker 01: It is the duties and the recovery of those duties that triggers all the interest analysis in this case. [00:33:37] Speaker 01: If no duties are due, there's no interest. [00:33:39] Speaker 02: So if there were a possibility of paying the duties [00:33:44] Speaker 02: but leaving a dispute over interest to be resolved later, then do you understand this statute as precluding 580 interest even if the government has to bring a lawsuit to get the interest because the statute says that you can only get 580 interest on suits which are brought for the recovery of duties? [00:34:04] Speaker 01: I think, Your Honor, because the suits are for recovery of duties, [00:34:08] Speaker 01: I think duties is still nevertheless, even in that scenario, the duties would still be implicated because the interest couldn't have existed without first the presence of the duties. [00:34:17] Speaker 01: So they're kind of bundled. [00:34:19] Speaker 02: Interest doesn't run without... The statute very clearly distinguishes between duties and 1505D interest over and over throughout. [00:34:27] Speaker 02: Interest is never called duties and duties are never called interest. [00:34:30] Speaker 02: So if a suit is being brought solely to recover interest under 1505D, which it is, it's interest, it's not duties. [00:34:38] Speaker 02: then how would 580 ever apply? [00:34:40] Speaker 01: Then that, Your Honor, if before the litigation is ever brought, the complete amount of duties are paid? [00:34:47] Speaker 02: Yes. [00:34:48] Speaker 01: And generally, I mean, with the bonds, [00:34:52] Speaker 01: that are due, most of the time the bonds are insufficient for the anti-dumping duties. [00:34:57] Speaker 01: So a lot of times there isn't even that vigorous to allow for a 1505D interest to run. [00:35:02] Speaker 01: We see that in two out of the four cases here and in other cases as well. [00:35:08] Speaker 01: In that situation, your honor, based on the plain language of 580, there's probably a very good argument that [00:35:14] Speaker 01: that wouldn't be 580 interest because there has to, at least within that litigation, have to be some component of recovery of duties. [00:35:22] Speaker 01: Although I haven't really considered this fully. [00:35:25] Speaker 01: And as you know, Your Honor, any argument can always be made. [00:35:29] Speaker 01: And I don't know whether the recovery of duties would also indicate. [00:35:32] Speaker 02: But the reason this one matters to me is because you're saying the statute is meant to allow for the government to recover 580 interest on both duties and 1505D interest. [00:35:45] Speaker 02: And yet a lawsuit, if it were limited to 1505D interest, would not be something under which the government can recover 580 interest. [00:35:53] Speaker 02: So does that indicate that maybe Congress never intended interest on interest? [00:35:59] Speaker 01: I don't think so, Your Honor, because it would require a payment by assurity prior to the litigation. [00:36:07] Speaker 02: Which we just figured out probably can't be done, but in any event. [00:36:11] Speaker 01: Well, no. [00:36:11] Speaker 01: I mean, if the assurity had actually paid, [00:36:14] Speaker 01: the demand that was due, the face amount. [00:36:17] Speaker 02: Could they have paid the face amount and then continue to contest whether or not they actually owed the 1505D interest? [00:36:23] Speaker 02: Sure. [00:36:23] Speaker 02: Even though they had paid it? [00:36:24] Speaker 02: Yes. [00:36:25] Speaker 02: Kind of like your taxes, right? [00:36:26] Speaker 02: You can pay up front and then continue to dispute whether the liability was correct. [00:36:29] Speaker 03: I guess I'm confused because I thought when the surety pays up money, the money has to go to any interest that's due first before you can pay off principal. [00:36:41] Speaker 01: Well, if there's a dispute, Customs has a mechanism to place things into suspense. [00:36:46] Speaker 01: In fact, the payment that was made as part of the 10343 case was placed in suspense until the final resolution about how the interest is going to run, because it doesn't make sense to start forwarding that money on. [00:36:59] Speaker 01: It sits in an account until the litigation has been figured out. [00:37:02] Speaker 01: So Customs has that mechanism. [00:37:04] Speaker 01: But I guess the bigger issue here is, why are we even talking 580? [00:37:09] Speaker 01: 580 shouldn't even be in a court because if you had a surety who was willing to make the payment in the first instance, it wouldn't end up with the government bringing litigation. [00:37:19] Speaker 01: They would have made a payment and then disputed the interest in a protest and then brought it as a 1581A action and they could have set the interest, all the interest that was due at that point in time with the court and then the court's mechanism, if it's submitted to the court until the end of the case, [00:37:36] Speaker 01: The court's mechanism is to generate the very interest that would have generated under equitable constructs, and it would have been within the domain of the surety. [00:37:44] Speaker 01: Because once again, the United States should not be bringing actions against sureties to whom it afforded the luxury to make money by selling bonds. [00:37:52] Speaker 01: It doesn't make any sense. [00:37:53] Speaker 01: And I think this court gets it really right. [00:37:56] Speaker 01: In Hartford, it recognizes that Congress really wants this [00:38:00] Speaker 01: to be showing up as a 1581A. [00:38:02] Speaker 01: And only as a last resort should the government be bringing an action. [00:38:05] Speaker 02: We have to move on. [00:38:05] Speaker 02: We went way over. [00:38:06] Speaker 02: Thank you very much. [00:38:08] Speaker 02: The case is taken under submission. [00:38:10] Speaker 02: Our next case for today.