D.C. Law Library - § 46–224. Enforcement of orders by means other than income withholding.
↪ § 46–224. Enforcement of orders by means other than income withholding.
§ 46–224.01. Interception of lottery prizes for delinquent child support payments.
§ 46–224. Enforcement of orders by means other than income withholding.
(a) A lien is created by operation of law against the real and personal property of an obligor subject to a support order who resides or owns property in the District for amounts of overdue support, as defined by section 466(e) of the Social Security Act, approved August 16, 1984 (98 Stat. 1310; 42 U.S.C. § 666(e)), that are owed by the obligor. In addition to withholding of earnings or other income, this lien shall be separate from and in addition to any other lien created by or provided for under law. The IV-D agency or the custodian to whom support is payable shall have the priority of a secured creditor.
(b) The lien shall be enforceable from the date the lien is filed and recorded in the Office of the Recorder of Deeds of the District of Columbia. A lien may be enforced by the IV-D agency or the custodian to whom support is payable. This remedy does not affect the availability of other remedies provided by law.
(2) A court, after notice to the claimant and hearing, has ordered the release of the lien because arrearages do not exist.
(d) The District shall accord full faith and credit to liens described in subsection (b) of this section that arise in another state, if the other state’s IV-D agency, a party to a support action, or other entity seeking to enforce such a lien complies with the procedural rules relating to recording or serving liens that arise in the District, except that judicial notice or hearing prior to enforcement of the lien shall not be required.
This section is referenced in § 26-532 and § 46-226.03.
“(a) A lien may be asserted by the Mayor or the custodian to whom support is payable upon the real and personal property of the responsible relative. In addition to withholding of earnings or other income, this lien shall be separate from and in addition to any other lien created by or provided for under law. The District or the custodian to whom support is payable shall have the priority of a secured creditor.
D.C. Law 16-100, in par. (c), substituted “subsection (b)” for “subsection (a)”.
For temporary amendment of section, see § 7(t) of the Child Support and Welfare Reform Compliance Second Emergency Amendment Act of 1998 (D.C. Act 12-309, March 20, 1998, 45 DCR 1923), § 7(t) of the Child Support and Welfare Reform Compliance Second Emergency Amendment Act of 1998 (D.C. Act 12-439, August 12, 1998, 45 DCR 6110), § 7(t) of the Child Support and Welfare Reform Compliance Legislative Review Emergency Amendment Act of 1998 (D.C. Act 12-503, October 27, 1998, 45 DCR 8495), and § 7(t) of the Child Support and Welfare Reform Compliance Second Congressional Review Emergency Amendment Act of 1998 (D.C. Act 12-600, January 20, 1999, 46 DCR 1239).
For temporary amendment of section, see § 7(k) of the Child Support and Welfare Reform Compliance Emergency Amendment Act of 1997 (D.C. Act 12-222, December 23, 1997, 44 DCR 114).
For temporary (90-day) amendment of section, see § 107(u) of the Child Support and Welfare Reform Compliance Emergency Amendment Act of 1999 (D.C. Act 13-126, August 4, 1999, 46 DCR 6606).
For temporary (90-day) amendment of section, see § 107(u) of the Child Support and Welfare Reform Compliance Legislative Review Emergency Amendment Act of 1999 (D.C. Act 13-177, November 2, 1999, 46 DCR 9678).
For temporary (90-day) amendment of section, see § 107(u) of the Child Support and Welfare Reform Compliance Congressional Review Emergency Amendment Act of 1999 (D.C. Act 13-241, January 11, 2000, 47 DCR 581).
For temporary (90 day) amendment of section, see § 107(u) of the Child Support and Welfare Reform Compliance Emergency Amendment Act of 2000 (D.C. Act 13-446, November 7, 2000, 47 DCR 9213).
For temporary (90 day) amendment of section, see § 108(u) of Child Support and Welfare Reform Compliance Congressional Review Emergency Amendment Act of 2001 (D.C. Act 14-5, February 13, 2001, 48 DCR 2440).
For temporary (90 day) amendment of section, see § 3(y) of Income Withholding Transfer and Revision Emergency Amendment Act of 2005 (D.C. Act 16-167, July 26, 2005, 52 DCR 7648).
For temporary (90 day) amendment of section, see § 3(y) of Income Withholding Transfer and Revision Congressional Review Emergency Amendment Act of 2005 (D.C. Act 16-200, November 17, 2005, 52 DCR 10490).
For temporary (225 day) amendment of section, see § 7(t) of Child Support and Welfare Reform Compliance Temporary Amendment Act of 1998 (D.C. Law 12-210, April 13, 1999, law notification 46 DCR 3832).
For temporary (225 day) amendment of section, see § 107(u) of Child Support and Welfare Reform Compliance Temporary Amendment Act of 1999 (D.C. Law 13-57, March 7, 2000, law notification 47 DCR 1979).
For temporary (225 day) amendment of section, see § 107(u) of Child Support and Welfare Reform Compliance Temporary Amendment Act of 2000 (D.C. Law 13-207, March 31, 2001, law notification 48 DCR 3238).
Section 3(y) of D.C. Law 16-42, in subsec. (c), substituted “subsection (b)” for “subsection (a)”.
Delegation of authority pursuant to Law 6-166, see Mayor’s Order 87-273, December 10, 1987.


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SPOKANE & B.C. RY. CO. v. WASHINGTON & G.N. RY. CO.
Messrs. William T. Beck, W. C. Keegin, and A. M. Craven for plaintiff in error.
[219 U.S. 166, 168] Mr. Thomas R. Benton for defendants in error.
In this case the Spokane & British Columbia Railway Company, plaintiff in error, began an action in the superior court of the state of Washington for Ferry county, to enjoin the Washington & Great Northern Railway Company, the Washington Improvement & Development Company, and others, from interfering with the use of a certain right of way for railway purposes through the Colville Indian Reservation in the state of Washington, which, it was alleged, belonged to the plaintiff. The plaintiff had judgment in its favor in the superior court. Upon proceedings in error, the judgment was reversed and a judgment entered in favor of the present defendants in error, defendants below. 49 Wash. 280, 95 Pac. 64. To that judgment a writ of error was sued out from this court.
Section 4 authorized the company to enter upon the reservation for the purpose of surveying and locating the line.
Section 5 provided that the right therein granted should be forfeited by said company unless at least 25 miles of said railroad shall be constructed through the said reservation withing two years after the passage of the act.
As found by the supreme court of Washington, the grading was not begun within the six months provided, nor were 25 miles of said railroad constructed through the reservation within two years after the passage of the act, as provided in 5. [219 U.S. 166, 173] Subsequently the maps of location of the plaintiff in error were approved by the Secretary of the Interior, and the contention is on its behalf that the rights of the defendant in error, as successor of the original grantee, had terminated because of the failure to keep the conditions of the granting act. On the part of the defendant in error it is contended that, inasmuch as the grant was in proesenti, and there has been no subsequent act of Congress or direct proceeding in behalf of the United States to forfeit the title of the grantee, its rights are unimpaired and superior in the conflicting right of way to those of the plaintiff in error.
The supreme court of Washington, reveiwing the decisions in this court, was of opinion that the rights granted in the act of June 4, 1898, had not been forfeited, and inured to the benefit of the Washington & Great Northern Railway Company as successor of the Washington Improvement & Development Company.
This court has had frequent occasion to consider acts of this character, and a brief review of its decisions will, we think establish the rule to be applied. The leading case is Schulenberg v. Harriman, 21 Wall. 44, 22 L. ed. 551. In that case there was an act of Congress making a grant of lands, conditioned that all lands remaining unsold after ten years should revert to the United States. It was there held that notwithstanding this condition, no one could take advantage of its nonperformance except the grantor or his heirs, or the successors of the grantor, if the grant proceeded from an artificial person, and that unless such persons asserted the right to forfeiture, the title remained unimpaired in the grantee; and it was further held that if the grant be a public one, the right to forfeiture must be asserted by judicial proceedings authorized by law, the equivalent of an inquest of office at common law, or there must be some legislative assertion of ownership for the breach of the condition. This doctrine was approved [219 U.S. 166, 174] in Grinnell v. Chicago, R. I. & P. R. Co. 103 U.S. 739 , 26 L. ed. 456; Van Wyck v. Knevals, 106 U.S. 360 , 27 L. ed. 201, 1 Sup. Ct. Rep. 336; and St. Louis I. M. & S. R. Co. v. McGee, 115 U.S. 469 , 29 L. ed. 446, 6 Sup. Ct. Rep. 123.
In Bybee v. Oregon & C. R. Co. 139 U.S. 663 , 35 L. ed. 305, 11 Sup. Ct. Rep. 641, the grant provided that not only the lands should revert to the United States for failure to perform the conditions, but the grant itself should be null and void for noncompliance with the conditions. It was nevertheless held that the conditions were subsequent, and the title could not be forfeited except upon proper proceedings by the government, judicial in their character, or an act of Congress, competent for that purpose.
Applying the principles of those cases to the grant in question, we find that in its terms the granting clause is clear and distinct, and conveys an estate in proesenti. There is nothing in the conditions inconsistent with the vesting of the title, or requiring things to be done before the title can be vested. The company is required to commence grading its located line within six months, and the grant is to be forfeited unless at least 25 miles shall be constructed within two years after the passage of the act. These things may be done after the vesting of the title, and do not necessarily precede the vesting of the estate.
Reading this grant in the light of the former adjudications of this court, we think it must be held that it was [219 U.S. 166, 175] the intention of Congress that the grantee should perform these conditions after acquiring title and taking possession, and therefore that the conditions were subsequent. This being true, there could be no forfeiture on the part of the United States without some appropriate judicial or legislative action, which it is not claimed was taken in this case. We think the supreme court of the state of Washington was right in its construction of the grant under the circumstances shown.
The contention that the grant was abandoned by the grantee, or that the circumstances show estoppel to make claim under it, do not present questions reviewable here. The state court having, in our veiw, properly decided the Federal question made, upon which this court alone could take jurisdiction, its judgment must be affirmed.

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In 2012, Meridian asked the U.S. Department of Commerce to issue a scope ruling that certain aluminum trim kit packages did not fall within the scope of the antidumping and countervailing duty orders (19 U.S.C. 1671(a)(1)) on aluminum extrusions from the People’s Republic of China. Commerce found the trim kits subject to the Orders’ scope. Five opinions and three remands later, the Trade Court sustained Commerce’s third remand determination, under protest, that the trim kits do not fall within the Orders’ scope. The Federal Circuit reversed. Commerce did not err in its interpretation of the finished goods kit exclusion in the initial scope ruling. The exclusion states that, to fall outside the scope of the Orders, a finished goods kit must contain more than only aluminum extrusion parts necessary for final assembly. Substantial evidence supports Commerce’s finding that the trim kits meet the exception to the finished goods kit exclusion.
United States Court of Appeals for the Federal Circuit ______________________ MERIDIAN PRODUCTS, LLC, Plaintiff-Appellee v. UNITED STATES, Defendant-Appellant ______________________ 2016-1730 ______________________ Appeal from the United States Court of International Trade in No. 1:13-cv-00018-RKM, Senior Judge R. Kenton Musgrave. ______________________ Decided: March 28, 2017 ______________________ ALEXANDER SCHAEFER, Crowell & Moring, LLP, Washington, DC, argued for plaintiff-appellee. Also represented by DANIEL CANNISTRA; FRANCES PIERSON HADFIELD, New York, NY. TARA K. HOGAN, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellant. Also represented by BENJAMIN C. MIZER, JEANNE E. DAVIDSON, REGINALD T. BLADES, JR.; JESSICA M. LINK, Office of Chief Counsel for Trade Enforcement and Compliance, United States Department of Commerce, Washington, DC. 2 MERIDIAN PRODS., LLC v. UNITED STATES ______________________ Before PROST, Chief Judge, NEWMAN and WALLACH, Circuit Judges. WALLACH, Circuit Judge. In 2012, Appellee Meridian Products, LLC (“Meridian”) asked the U.S. Department of Commerce (“Commerce”) to issue a scope ruling that certain aluminum trim kit packages (“trim kits”) do not fall within the scope of the antidumping and countervailing duty orders on aluminum extrusions from the People’s Republic of China (“the Orders”). Commerce found the trim kits subject to the Orders’ scope, and Meridian challenged that ruling before the U.S. Court of International Trade (“the CIT”). Five opinions and three remands later, the CIT sustained Commerce’s third remand determination, in which Commerce found, under protest, that the trim kits do not fall within the Orders’ scope. See Meridian Prods., LLC v. United States (Meridian V), 145 F. Supp. 3d 1329, 1331 (Ct. Int’l Trade 2016). Appellant United States (“Government”) appeals. We possess subject matter jurisdiction pursuant to 28 U.S.C. § 1295(a)(5) (2012). We reverse. BACKGROUND The instant appeal addresses whether particular products fall within the scope of existing antidumping and countervailing duty orders. As a result, we examine the Orders’ scope, the description of the products in question, and the procedural history before turning to the merits. I. The Subject Orders Commerce generally investigates whether a foreign government or public entity provided “a countervailable subsidy with respect to the manufacture, production, or export” of merchandise that has entered the United MERIDIAN PRODS., LLC v. UNITED STATES 3 States, 19 U.S.C. § 1671(a)(1) (2012), and whether particular merchandise was sold in the United States “at less than its fair value,” 1 id. § 1673(1). At the conclusion of an investigation, if Commerce and the U.S. International Trade Commission (“the ITC”) make the requisite findings, 2 Commerce publishes an order imposing duties on imported merchandise covered by the investigation. Id. §§ 1671e(a), 1673e(a). In each order, Commerce must “include a description of the subject merchandise in such detail as [it] . . . deems necessary.” 3 Id. §§ 1671e(a)(2), 1673e(a)(2). Congress has instructed Commerce to make these determinations using separate statutory formulas. A subsidy is countervailable if it provides a form of a “financial contribution” to a person, confers a “benefit” on that person, and is “specific.” 19 U.S.C. § 1677(5), (5A). A foreign exporter sells merchandise at less than its fair value (i.e., dumps) when the merchandise’s “normal value” (i.e., the merchandise’s price in the home market) “exceeds the [merchandise’s] export price or constructed export price” (i.e., the merchandise’s price in the United States). Id. § 1677(35)(A). 2 The ITC determines whether the merchandise “materially injure[s]” a domestic industry, “threaten[s]” the industry with material injury, or “materially retard[s]” the industry’s “establishment.” 19 U.S.C. §§ 1671(a), 1673(a). 3 The discretion that Congress afforded to Commerce to describe the subject merchandise comports with the principle that “remedial legislation,” like the trade remedy laws, “should . . . be given a liberal interpretation” and “exemptions from its sweep should be narrowed and limited to effect the remedy intended.” Piedmont & N. Ry. Co. v. Interstate Commerce Comm’n, 286 U.S. 299, 311, 311−12 (1932); see, e.g., Guangdong Wireking 1 4 MERIDIAN PRODS., LLC v. UNITED STATES In 2011, Commerce published the Orders. See Aluminum Extrusions from the People’s Republic of China (Antidumping Duty Order), 76 Fed. Reg. 30,650 (Dep’t of Commerce May 26, 2011); Aluminum Extrusions from the People’s Republic of China (Countervailing Duty Order), 76 Fed. Reg. 30,653 (Dep’t of Commerce May 26, 2011). 4 The scope of the Orders describes the subject merchandise as “aluminum extrusions” that “are shapes and forms, produced by an extrusion process, made from” specified aluminum alloys. Antidumping Duty Order, 76 Fed. Reg. at 30,650. The subject extrusions possess “a wide variety of shapes and forms” in “a variety of finishes.” Id. The subject extrusions also “may be described at the time of importation as parts for final finished products that are assembled after importation” and “may be identified with reference to their end use.” Id. at 30,650, 30,651. The Orders’ scope contains several exclusions. In relevant part, the scope excludes finished goods containing aluminum extrusions that are entered unassembled in a “finished goods kit.” A finished goods kit is understood to mean a packaged combination of parts that contains, at the time of importation, all of the necessary parts to fully assemble a final finished good and requires no further finishing or fabrication, such as cutting or punching, and is Housewares & Hardware Co. v. United States, 745 F.3d 1194, 1205−06 (Fed. Cir. 2014) (discussing the “remedial nature” of the antidumping and countervailing duty laws). 4 The Orders recite the same scope. Compare Antidumping Duty Order, 76 Fed. Reg. at 30,650–51, with Countervailing Duty Order, 76 Fed. Reg. at 30,653–54. We refer only to the scope in the Antidumping Duty Order for ease of reference. MERIDIAN PRODS., LLC v. UNITED STATES 5 assembled “as is” into a finished product. An imported product will not be considered a “finished goods kit” and therefore excluded from the scope of the [Orders] merely by including fasteners such as screws, bolts, etc. in the packaging with an aluminum extrusion product. Id. at 30,651. The instant appeal concerns whether Meridian’s trim kits meet the terms of the “finished goods kit” exclusion. II. Meridian’s Trim Kits “[B]ecause the descriptions of subject merchandise” in an order’s scope pertain to a class or kind of goods and therefore “must be written in general terms,” questions arise as to whether a particular product falls within the scope of an existing order. 19 C.F.R. § 351.225(a) (2012); see 19 U.S.C. § 1677(25) (defining “subject merchandise” as “the class or kind of merchandise that is within the scope of an . . . order”). Congress has authorized Commerce to issue scope rulings clarifying “whether a particular type of merchandise is within the class or kind of merchandise described in an existing . . . order.” 19 U.S.C. § 1516a(a)(2)(B)(vi); accord Royal Bus. Machs., Inc. v. United States, 669 F.2d 692, 699 (CCPA 1982) (confirming Commerce’s authority to issue scope rulings). An interested party may submit an application to Commerce to obtain clarification about an order’s scope. 5 19 C.F.R. § 351.225(c); see Smith Corona Corp. v. United States, 915 F.2d 683, 685–86 (Fed. Cir. 1990) (explaining that scope rulings clarify the terms of the original order but do not modify or amend them). Meridian, the importer of the trim kits, asked Commerce to issue a scope ruling that “confirm[s]” the kits do An “interested party” includes, inter alia, “an importer of subject merchandise.” 19 U.S.C. § 1677(9)(A). 5 6 MERIDIAN PRODS., LLC v. UNITED STATES not fall within the Orders’ scope. J.A. 200. Meridian described the trim kits as “an aesthetic frame around the perimeter of (though not attached to) a major home kitchen appliance,” such as a “freezer” or “refrigerator.” J.A. 200, 201. According to Meridian, the “[t]rim kits are sold as a package of finished parts” and “consist of extruded aluminum forms made from aluminum alloy” covered by the Orders’ scope. J.A. 201. Meridian further stated that “[t]he trim kits also include a customer installation kit for the consumer to use during the final assembly in the residential kitchen,” with the installation kit consisting of “a hexagonal wrench,” “fasteners,” “[a] set of instructions,” and “hinge covers.” J.A. 201, 203. III. Procedural History In its initial scope ruling, Commerce found the trim kits subject to the Orders. J.A. 186–88. Commerce found that the trim kits “are aluminum extrusions which are shapes and forms made of an aluminum alloy that is covered by the scope of the Orders.” J.A. 187 (internal quotation marks omitted). Commerce also rejected Meridian’s contention that the trim kits meet the finished goods kit exclusion. J.A. 187–88. Assessing the trim kits against the Orders’ scope and prior scope rulings, Commerce found that the trim kits did not meet the terms of the finished goods kit exclusion because, as the exclusion states, a kit’s inclusion of “fasteners” and other extraneous materials does not remove it from the Orders’ scope. J.A. 187–88. Meridian appealed to the CIT, which then remanded Commerce’s initial scope ruling. Meridian Prods., LLC v. United States (Meridian I), No. 1:13-cv-00018-RKM, 2013 WL 2996233, at *1 (Ct. Int’l Trade June 17, 2013). Observing that “a remand is sometimes needed if an intervening event may affect the validity of the agency action,” the CIT agreed with Meridian’s argument that Commerce MERIDIAN PRODS., LLC v. UNITED STATES 7 failed to consider a prior scope ruling interpreting terms of the Orders not at issue in the instant appeal. Id. Subsequent litigation resulted in four more CIT opinions that included two additional remands to Commerce. See Meridian Prods., LLC v. United States (Meridian II), 971 F. Supp. 2d 1259, 1271 (Ct. Int’l Trade 2014) (remanding Commerce’s first remand determination that the trim kits are within the scope of the Orders); Meridian Prods., LLC v. United States (Meridian III), 37 F. Supp. 3d 1342, 1354 (Ct. Int’l Trade 2014) (sustaining Commerce’s second remand determination that the trim kits are within the scope of the Orders); Meridian Prods., LLC v. United States (Meridian IV), 77 F. Supp. 3d 1307, 1318–19 (Ct. Int’l Trade 2015) (granting motion for reconsideration of Meridian III and remanding Commerce’s second remand determination for reconsideration). In the third remand determination, Commerce concluded that it must “find that the trim kits . . . are excluded from the Orders as finished goods kits” to comport with the CIT’s interpretation of the Orders’ scope. J.A. 25. In so doing, Commerce observed that “it appears that the [CIT]’s instructions resulted in a tension between the [CIT]’s holding and the plain language of the scope of the Orders.” J.A. 25. The CIT sustained Commerce’s third remand determination in its final opinion. See Meridian V, 145 F. Supp. 3d at 1330–31. This appeal followed. DISCUSSION I. Standard of Review We apply the same standard of review as the CIT when reviewing a Commerce scope ruling, see Shenyang Yuanda Aluminum Indus. Eng’g Co. v. United States, 776 F.3d 1351, 1354 (Fed. Cir. 2015), though we “give due respect to the [CIT’s] informed opinion,” Novosteel SA v. United States, 284 F.3d 1261, 1269 (Fed. Cir. 2002) (internal quotation marks and citation omitted). Under that standard, we uphold a Commerce scope ruling that is 8 MERIDIAN PRODS., LLC v. UNITED STATES supported “by substantial evidence on the record” and otherwise “in accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i). “Substantial evidence is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Eckstrom Indus., Inc. v. United States, 254 F.3d 1068, 1071 (Fed. Cir. 2001) (internal quotation marks and citation omitted). II. The Trim Kits Fall Within the Unambiguous Terms of the Orders’ Scope This appeal hinges on the interpretation of the Orders’ scope. The Government alleges that “the plain language of the Orders demonstrates that [the] . . . trim kits are within the scope of the Orders.” Appellant’s Br. 16 (capitalization modified). The Government further contends that, “even assuming the scope language of the Orders were ambiguous, the [CIT] failed to defer to Commerce’s reasonable interpretation of the scope language.” Id. at 24 (capitalization modified). After discussing the applicable legal framework, we address these arguments in turn. A. Legal Framework “[N]o specific statutory provision govern[s] the interpretation of the scope of antidumping or countervailing orders.” Shenyang, 776 F.3d at 1354. Commerce has filled the statutory gap with a regulation that sets forth a two-step test for answering scope questions, 19 C.F.R. § 351.225(k), and our case law has added another layer to the inquiry. First, Commerce must look to the text of an order’s scope; second, Commerce will consult descriptions of the merchandise in other sources; and third, if still necessary, Commerce may consider additional factors comparing the merchandise in question to merchandise subject to the order. Commerce’s inquiry must begin with the order’s scope to determine whether it contains an ambiguity and, thus, MERIDIAN PRODS., LLC v. UNITED STATES 9 is susceptible to interpretation. 6 See, e.g., Mid Continent Nail Corp. v. United States, 725 F.3d 1295, 1302 (Fed. Cir. 2013) (explaining that the inquiry begins with “the language of the final order” and turns to other sources only if the scope itself “is ambiguous”); ArcelorMittal, 694 F.3d at 87 (similar); see also Duferco Steel, Inc. v. United States, 296 F.3d 1087, 1097 (Fed. Cir. 2002) (explaining that the scope is the “cornerstone” of the analysis and “a predicate for the interpretive process”). If the scope is unambiguous, 7 it governs. See, e.g., ArcelorMittal, 694 F.3d at 87 (“If [the scope] is not ambiguous, the plain meaning of the language governs.”); accord Walgreen Co. v. United States, 620 F.3d 1350, 1357 (Fed. Cir. 2010) (similar). “[B]ecause the meaning and scope of . . . orders are issues particularly within [Commerce’s] expertise and special competence,” we grant Commerce “substantial deference” with regard to its interpretation of its own antidumping duty and countervailing duty orders. King Supply Co. v. United States, 674 F.3d 1343, 1348 (Fed. Cir. 2012) (internal quotation marks and citations omitted). Nevertheless, the question of whether the unambiguous terms of a scope control the inquiry, or whether some ambiguity exists, is a question of law that we review de novo. See, e.g., Allegheny Bradford Corp. v. United States, Although a “low threshold” exists for Commerce to find ambiguity, Novosteel, 284 F.3d at 1272, Commerce must not “identify an ambiguity where none exists,” ArcelorMittal Stainless Belg. N.V. v. United States, 694 F.3d 82, 89 (Fed. Cir. 2012) (internal quotation marks and citation omitted). 7 The relevant scope terms are “unambiguous” if they have “a single clearly defined or stated meaning.” Unambiguous, Webster’s Third New International Dictionary of the English Language Unabridged (1986). 6 10 MERIDIAN PRODS., LLC v. UNITED STATES 342 F. Supp. 2d 1172, 1183 (Ct. Int’l Trade 2004) (“[A] scope determination is not in accordance with the law if it changes the scope of an order or interprets an order in a manner contrary to the order’s terms.” (citing Duferco, 296 F.3d at 1094–95)); accord Shenyang Yuanda Aluminum Indus. Eng’g Co. v. United States, 146 F. Supp. 3d 1331, 1344 (Ct. Int’l Trade 2016) (same); Walgreen Co. v. United States, 33 Ct. Int’l Trade 1620, 1623 (2009) (similar), aff’d, 620 F.3d 1350. The question of whether a product meets the unambiguous scope terms presents a question of fact reviewed for substantial evidence. See, e.g., Novosteel, 284 F.3d at 1269. “Scope orders are interpreted with the aid of” other sources as described by regulation. Duferco, 296 F.3d at 1097 (internal quotation marks and citation omitted). Specifically, Commerce “will” consult “[t]he descriptions of the merchandise contained in the petition, the initial investigation, and [prior] determinations of [Commerce] (including prior scope determinations) and the [ITC].” 19 C.F.R. § 351.225(k)(1). Although a party’s description of merchandise in these sources may aid Commerce in making its determination, that description “cannot substitute for language in the order itself” because “[i]t is the responsibility of [Commerce], not those who [participated in] the proceedings, to determine the scope of the final orders.” Duferco, 296 F.3d at 1097 (footnote omitted). Commerce’s analysis of these sources against the product in question produces factual findings reviewed for substantial evidence. See, e.g., Fedmet Res. Corp. v. United States, 755 F.3d 912, 919–22 (Fed. Cir. 2014) (reviewing Commerce’s analysis under § 351.225(k)(1) for substantial evidence). MERIDIAN PRODS., LLC v. UNITED STATES 11 If the descriptions in the § 351.225(k)(1) sources “are not dispositive,” 8 Commerce will consider the following factors: “(i) [t]he physical characteristics of the product; (ii) [t]he expectations of the ultimate purchasers; (iii) [t]he ultimate use of the product; (iv) [t]he channels of trade in which the product is sold; and (v) [t]he manner in which the product is advertised and displayed.” 19 C.F.R. § 351.225(k)(2). “In conducting this analysis, it is well settled that Commerce has discretion in how to balance” these factors. Novosteel SA v. United States, 128 F. Supp. 2d 720, 732 (Ct. Int’l Trade 2001) (internal quotation marks and citations omitted), aff’d, 284 F.3d 1261. Commerce’s analysis of these factors against the product in question yields factual findings reviewed for substantial evidence. See, e.g., Crawfish Processors All. v. United States, 483 F.3d 1358, 1363–64 (Fed. Cir. 2007) (reviewing Commerce’s analysis under § 351.225(k)(2) for substantial evidence). B. The CIT’s Interpretation Conflicts with Precedent and the Orders’ Unambiguous Terms According to Commerce, the CIT erred in its interpretation of the Orders’ scope because “a reasonable reading of the [O]rders as a whole” demonstrates that “an aluminum extrusion product and fasteners, without more, will not qualify for the finished goods kit exclusion.” Appellant’s Br. 14. The CIT disagreed. See, e.g., Meridian IV, 77 F. Supp. 3d at 1318−19. We agree with Commerce. We must first assess whether the plain language of the Orders’ scope, in light of the disputed 19 C.F.R. § 351.225(k)(1) sources, is unambiguous. The relevant The term “dispositive” means that the descriptions in the § 351.225(k)(1) sources “definitively answer the scope question.” Sango Int’l, L.P. v. United States, 484 F.3d 1371, 1379 (Fed. Cir. 2007). 8 12 MERIDIAN PRODS., LLC v. UNITED STATES exclusion to the Orders excludes finished goods kits, which it defines as “packaged combination[s] of parts that contain, at the time of importation, all of the necessary parts to fully assemble a final finished good and require no further finishing or fabrication, such as cutting or punching, and [are] assembled ‘as is’ into a finished product.” Antidumping Duty Order, 76 Fed. Reg. at 30,651. Commerce contends that this exclusion contains an exception, which explains that “[a]n imported product will not be considered a ‘finished goods kit’” and therefore excluded from the scope of the Orders “merely by including fasteners such as screws, bolts, etc. in the packaging with an aluminum extrusion product.” Appellant’s Br. 17 (quoting Antidumping Duty Order, 76 Fed. Reg. at 30,651). In Commerce’s view, products that “meet the preliminary requirements for the finished goods kit exclusion may nonetheless be subject to the [O]rders” if a kit contains only aluminum extrusions and fasteners. Id. Reading the terms of the Orders’ scope, the CIT disagreed with Commerce’s interpretation. The CIT instead found that “[c]ontext renders unreasonable Commerce’s reading of the exclusionary language of the scope.” Meridian IV, 77 F. Supp. 3d at 1316. The CIT reasoned that, because the products satisfy the definition of a “finished goods kit,” “[t]he inclusion of ‘fasteners’ or ‘extraneous materials’ is not determinative when qualifying a kit consisting of multiple parts which otherwise meets the exclusionary requirements.” Id. The CIT added that “there is nothing in the language [of the exclusion] that indicates that the parts in an otherwise qualifying kit cannot consist entirely of aluminum extrusions.” Id. Thus, the CIT determined that a kit covered by the exclusion should not be removed from the exclusion because it includes fasteners considered to be “parts necessary for forming a complete finished good.” Id. at 1317. MERIDIAN PRODS., LLC v. UNITED STATES 13 The CIT’s interpretation of the Orders’ scope suffers from three flaws. First, in the CIT’s view, the inquiry ends if a disputed product meets the definition of a “finished goods kit,” thereby resulting in the disputed product’s exclusion from the Orders. That interpretation fails to consider all of the terms of the exclusion (i.e., the statement that a product will not be considered a finished goods kits “merely by including fasteners”) and improperly elevates certain aspects of the exclusion over others by ignoring the qualifying language that Commerce describes as an exception. See, e.g., King Supply, 674 F.3d at 1350 (interpreting a scope so that it is “informative and non-superfluous”); Eckstrom, 254 F.3d at 1073 (rejecting a construction that rendered scope terms “mere surplusage”). Where (as here) multiple sentences comprise an order’s scope and “there is no indication that one sentence helps to define the scope while the other does not,” we will not read out a sentence intended by Commerce to be given effect. Allegheny, 342 F. Supp. 2d at 1190. Second, the CIT would exclude a kit even if it consists entirely of unassembled aluminum extrusions and fasteners. That interpretation would render the Orders’ scope, which by its terms covers aluminum extrusions, meaningless. See, e.g., Duferco, 296 F.3d at 1095 (stating that “Commerce cannot interpret an . . . order so as to change the scope of that order” (internal quotation marks and citation omitted)). Third, the CIT’s interpretation would “render the [O]rders internally inconsistent” because it would allow for kits containing only unassembled aluminum extrusions and fasteners to be excluded from the scope of the Orders, whereas aluminum extrusions imported individually or as parts would be explicitly included in the scope. Wheatland Tube Co. v. United States, 161 F.3d 1365, 1371 (Fed. Cir. 1998); see King Supply, 674 F.3d at 1349 (stating that “requisite clear exclusionary language must leave no reasonable doubt that certain products were intended to be outside the scope of the . . . order”). 14 MERIDIAN PRODS., LLC v. UNITED STATES Commerce did not err in its interpretation of the finished goods kit exclusion in the initial scope ruling. See J.A. 178–89. The exclusion states that, to fall outside the scope of the Orders, a finished goods kit must contain more than only aluminum extrusion parts necessary for final assembly. See Antidumping Duty Order, 76 Fed. Reg. at 30,651 (describing the finished goods as those “containing aluminum extrusions” and packaged in a kit with a “combination of parts” (emphases added)). The exclusion does not limit the kits to aluminum extrusions and, instead, suggests the inclusion of non-aluminum parts in the kit with other materials. See id. Qualifying language further narrows the exclusion by reinforcing that the “mere” addition of fasteners will not bring a kit with only aluminum extrusions outside the scope of the Orders. Id. Finally, the exclusion states that the component parts of the kit relevant to the analysis are those parts in a “packaged combination of parts” that are “necessary . . . to fully assemble a final finished good,” regardless of additional materials that may be included in a kit’s packaging, but which are not otherwise included in the final assembled product. Id. Commerce’s determination is further supported by “prior scope rulings interpreting the same antidumping order[, which] are particularly relevant under [19 C.F.R. §] 351.225(k)(1).” Mid Continent, 725 F.3d at 1304 n.4 (citation omitted). Commerce, in its interpretation of the Orders’ scope, looked to prior rulings that found a kit with aluminum components and extraneous materials could not be excluded from the Orders’ scope using the same interpretation of the exclusion’s terms argued here. See J.A. 187–88 & n.32 (discussing, inter alia, J.A. 249−64). Thus, in light of its terms and Commerce’s prior scope rulings, the exclusion’s terms are unambiguous and, therefore, control the inquiry. See ArcelorMittal, 694 F.3d at 87. MERIDIAN PRODS., LLC v. UNITED STATES 15 Although not necessary to our analysis, other aspects of the Orders’ scope confirm the relevant exclusion’s unambiguous nature. For example, products “containing aluminum extrusions as parts” and “non-aluminum extrusion components” belonging to kits are generally excluded from the scope of the Orders. Antidumping Duty Order, 76 Fed. Reg. at 30,651. By contrast, products that contain only aluminum extrusions are included in the Orders’ scope. See id. (explaining that products containing aluminum extrusions and nothing more are within the scope, “regardless of whether they are ready for use at the time of importation”). The plain text of the other passages in the Orders thus contemplates a basic divide between products whose components relevant to the scope inquiry consist of non-aluminum extrusion parts, which are excluded from the scope of the Orders, and products whose components relevant to the scope inquiry contain only aluminum extrusion parts, which are not excluded. C. Substantial Evidence Supports Commerce’s Finding That the Orders’ Scope Covers Meridian’s Trim Kits We must now examine whether Meridian’s trim kits meet the unambiguous terms of the finished goods kit exclusion. 9 Commerce concedes that Meridian’s trim kits “meet the preliminary requirements for the finished goods Because Commerce asks us to sustain its initial scope ruling, Appellant’s Br. 28, we assess whether substantial evidence supports Commerce’s conclusion that the trim kits meet the Orders’ scope’s unambiguous terms, as Commerce concluded in the initial scope ruling, J.A. 187–88. We will not review Commerce’s findings as to the definition of “fasteners” or “extraneous materials” because they were not briefed or contested on the record before Commerce issued the initial scope ruling. See J.A. 190−98 (Petitioner’s Comments on Scope Request), 200−43 (Meridian Scope Ruling Request). 9 16 MERIDIAN PRODS., LLC v. UNITED STATES kit exclusion.” Appellant’s Br. 17. Thus, the only question that remains is whether the trim kits comprise an aluminum extrusion product that merely includes fasteners and other extraneous materials, such that the trim kits meet the exception to the finished goods kit exclusion. Substantial evidence supports Commerce’s finding that the trim kits meet the exception to the finished goods kit exclusion. Meridian explained that “[a] typical trim kit” includes the following items: trim, grilles, strips, brackets, screws, hinge covers, wrenches, and assembly instructions. J.A. 202; see J.A. 203. Meridian does not dispute that the trim, grilles, and strips are aluminum extrusions subject to the Orders. See Appellee’s Br. 12. Commerce found the brackets and screws to be “fasteners” that “meet the definition of extraneous fasteners and packaging materials described in” the qualifying language of the exclusion, J.A. 188, a determination that the record supports, see, e.g., J.A. 217 (where the assembly instructions demonstrate that the brackets and screws hold the aluminum extrusions in place). Commerce further found that the hinge covers, wrench, and assembly instructions are not relevant to the inquiry because they are “not assembled into or part of the assembled trim kit.” J.A. 188; see J.A. 105. That rationale comports with the Orders’ unambiguous scope. See Antidumping Duty Order, 76 Fed. Reg. at 30,651 (explaining that only parts comprising the final assembled product are considered for purposes of the finished goods kit exclusion). To conclude otherwise would introduce a condition not present in the Orders’ scope and, therefore, conflict with precedent. See, e.g., Smith Corona, 915 F.2d at 685−86 (explaining that scope rulings clarify the terms of the original order but do not modify or amend them). CONCLUSION We have considered the parties’ remaining arguments and find them unpersuasive. We (1) reverse the CIT’s MERIDIAN PRODS., LLC v. UNITED STATES 17 decision in Meridian V affirming Commerce’s third remand determination; (2) vacate the CIT’s decisions in Meridian I, Meridian II, Meridian III, and Meridian IV; (3) instruct the CIT to vacate Commerce’s first, second, and third remand determinations; and (4) order the CIT to reinstate Commerce’s initial scope ruling. Accordingly, the decision of the U.S. Court of International Trade is REVERSED COSTS Each party shall bear its own costs.


This letter is to advise you that the United States Food and Drug Administration (FDA) has recently reviewed your firm's labeling and marketing information for the drug product, "TopCare Earache Relief Ear Drops." Based on our review, the product is in violation of the Federal Food, Drug, and Cosmetic Act (the FD&C Act). As described in more detail below, this product is misbranded under Sections 502 and 503 [21 U.S.C. §§ 352 and 353] and in violation of Section 301 of the FD&C Act [21 U.S.C. § 331].
The product name, "TopCare Earache Relief Ear Drops"
"[S]timulate the body's ability to ease ear pain"
Based on these claims, your product is a drug as defined by Section 201(g)(1)(B) and (C) of the FD&C Act [21 U.S.C. § 321(g)(1)(B) and (C)], because it is intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in man, and/or intended to affect the structure or any function of the body.
Although marketed to consumers as an over-the-counter (OTC) drug, TopCare Earache Relief Ear Drops is a prescription drug under Section 503(b)(1) of the FD&C Act [21 U.S.C. § 353(b)(1)]. Section 503(b)(1) of the FD&C Act [21 U.S.C. 353 (b)(1)] identifies criteria for determining the prescription status of a product. The product listed above is a prescription drug within the meaning of Section 503(b)(1) of the FD&C Act because it is intended to treat diseases that require diagnosis and treatment by a physician or is intended to provide treatment for symptoms usually caused by an underlying disease process that requires diagnosis and treatment by a physician. Ear pain (earache) is not a currently recognized OTC indication in the final monograph for topical otic drug products (21 C.F.R. § 344) or in any approved OTC new drug application. OTC treatment is inappropriate for ear pain because consumers cannot distinguish its symptoms from those of more serious disorders of the ear or adjacent tissues which are not amenable to OTC treatment and which can lead to serious injury if not accurately diagnosed and treated by a licensed healthcare professional.
Because this product is subject to 503(b)(1) of the FD&C Act, the product is misbranded under Section 503(b)(4) of the FD&C Act [21 U.S.C. § 353(b)(4)] in that the label fails to bear the symbol, "Rx only."
TopCare Earache Relief Ear Drops is also misbranded within the meaning of Section 502(f)(1) of the FD&C Act [21 U.S.C. § 352 (f)(1)] in that its labeling fails to bear adequate directions for use as that term is defined in 21 C.F.R. § 201.5. The indication for which the product listed above is labeled and marketed, i.e., treatment of ear pain or inflammation, is not appropriate for OTC use. If an indication requires the supervision of a practitioner licensed to prescribe drugs, adequate directions for use cannot be written for an OTC drug product for that indication.
Furthermore, the drug is misbranded within the meaning of Section 502(a) of the FD&C Act [21 U.S.C. 352 (a)] in that its labeling is false or misleading because it represents the product as suitable for use by consumers to treat a condition which the Agency has found not appropriate for OTC drug treatment, and because it encourages OTC treatment for ear pain, but fails to distinguish among conditions that manifest with ear pain and that can lead to serious injury if not accurately diagnosed and treated by a licensed physician.
Your marketing of this misbranded product violates Section 301(a) of the FD&C Act [21 U.S.C. § 331(a)].
We recognize that your product is labeled as a homeopathic drug with active ingredients measured in homeopathic strengths. The definition of "drug" in Section 201(g)(1) of the FD&C Act [21 U.S.C. § 321(g)(1)] includes articles recognized in the official Homeopathic Pharmacopeia of the United States (HPUS), or any supplement to it. Homeopathic drugs are subject to the same regulatory requirements as other drugs; nothing in the FD&C Act exempts homeopathic drugs from any of the requirements related to adulteration, labeling, misbranding, or approval. We acknowledge that many homeopathic drugs are manufactured and distributed without FDA approval under enforcement policies set out in the Agency's Compliance Policy Guide entitled "Conditions Under Which Homeopathic Drugs May be Marketed (CPG 7132.15)" (the CPG). As its title suggests, the CPG identifies specific conditions under which homeopathic drugs may ordinarily be marketed. Thus, in order to fall under the enforcement policies set forth in the CPG, a homeopathic product must meet the conditions set forth in the CPG. One of those conditions is compliance with Section 503(b) of the FD&C Act. Under the CPG, only homeopathic products intended solely for self-limiting disease conditions amenable to self-diagnosis (of symptoms) and treatment may be marketed over-the-counter (OTC). Homeopathic products offered for conditions not amenable to OTC use must be marketed as prescription products.
Within fifteen (15) working days of receipt of this letter, please notify this office in writing of the specific steps that you have taken to correct violations. Include an explanation of each step being taken to prevent the recurrence of violations, as well as copies of related documentation. If you cannot complete corrective action within fifteen working days, state the reason for the delay and the time within which you will complete the correction.
Please send your reply to the U.S. Food and Drug Administration, Attn: Carrie Ann Plucinski, Compliance Officer, 550 W. Jackson Blvd., 15th Floor, Chicago, IL 60661. Refer to the Unique Identification Number (CMS case # 398232) when replying. If you have questions about the content of this letter, you may contact Ms. Plucinski at 312-596-4224 or by email at carrie.plucinski@fda.hhs.gov.
The question of whether a product intended to treat ear pain should be available by prescription only or OTC is governed by § 503(b) of the FD&C Act, to which all homeopathic drugs are subject. Accordingly, the Agency's conclusion that treatment or relief of ear pain is not an appropriate OTC indication is applicable to both homeopathic and non-homeopathic drugs marketed for that indication.
This page was posted on October 8, 2013.


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The SEC really wants to avoid Judge Leigh Martin May — the Northern District of Georgia judge who ruled in Hill v. SEC that the appointment of SEC ALJ James Grimes violated the appointments clause of Article II of the Constitution — like the plague. The Commission filed a motion in Timbervest, LLC v. SEC seeking nullification of the assignment of the Timbervest action to Judge May as a case related to Hill v. SEC because it does not properly fit the definition of a “related case.” The Timbervest complaint was filed after another case in that district making the same constitutional argument, Gray Financial Group v. SEC, was reassigned to Judge May as a related case. See Timbervest Files Complaint and TRO Motion To Halt SEC Proceeding. Timbervest identified it as a case related to Hill and Gray Financial in the cover sheet for its complaint, and the Timbervest action was assigned to Judge May, but the SEC’s papers do not address the actual process and rationale leading to the assignment of the case to Judge May. Instead, the SEC accused Timbervest of “judge shopping” by checking the “related case” box. By all appearances, however, it is the SEC that is “judge shopping” with this motion — shopping for any N.D. Ga. judge other than Judge Leigh Martin May.
The SEC’s motion can be read here: SEC motion opposing related case designation in Timbervest case. Plaintiff’s response can be read here: Plaintiff’s response to SEC reassignment motion in Timbervest.
This argument conflates the facts relevant to the SEC’s charges in the administrative cases with those relevant to the plaintiffs’ complaints pending before the district court. Each of these cases — that is, each of the federal court complaints — turn on essentially identical facts about the appointments of, powers granted to, and removal limitations for, the ALJs presiding over the proceedings. The critical facts at issue are not the underlying violations of law charged by the SEC, but the nearly identical facts surrounding the appointment of the ALJs assigned to hear the three administrative cases, the President’s control (or lack thereof) over those ALJs, and the powers they exercise as ALJs.
But putting aside the merits of the SEC’s argument, it is difficult to understand why the SEC cares about whether the Timbervest case is assigned to the same or a different judge than the Hill and Gray Financial cases. The SEC already informed Judge May that it will be appealing her preliminary injunction order to the 11th Circuit. See SEC Says It Will Appeal Hill v. SEC Decision, Seek To Stay the Case, and Try To Prevent Discovery. Given the fact that this issue is going up on appeal no matter what, why make a desperate motion to reassign a case turning on what is acknowledged to be an identical legal issue to another judge in the same district? The legal issue is going to be heard de novo by the court of appeals; there is little or no value in trying to force another judge to labor on another opinion. And even if the case were reassigned, the strong likelihood is that a different judge in the same district would defer to Judge May’s opinion — which, whether ultimately right or wrong, is thoughtful and certainly not off the wall — rather than labor through the complex analysis again, knowing that the 11th Circuit will be ruling soon in any event.
So, even putting aside the questionable legal arguments made by the Commission, the problem with this motion to reassign the Timbervest case is that it just doesn’t make a lot of tactical, strategic, or common sense. The filing of the motion, together with a bevy of other questionable recent decisions made by the Commission on the issues raised over the last year about the SEC’s administrative enforcement practices, leaves the impression that very little thought is being given to an overall plan for dealing with what is plainly an important problem. (Three examples come immediately to mind: the publication without hearings or comment of slapdash and plainly meaningless guidelines for bringing cases administratively, which have been roundly ridiculed by commentators; the recent debacle where the Commission asked ALJ Elliot for an affidavit on bias issues and Mr. Elliot declined to do so; and the Commission’s apparent paralysis in responding to remarks by former ALJ Lillian McEwen about possible systemic biases in the administrative court.) See Upon Further Review, SEC Memo on Use of Administrative Courts Was Indeed a Fumble; SEC ALJ Cameron Elliot Declines To Submit Affidavit “Invited” by the Commission; and Fairness Concerns About Proliferation of SEC Administrative Prosecutions Documented by Wall Street Journal.
Most everything the SEC is doing now with these cases, and on the critical issues raised by the Commission’s increased use of administrative enforcement actions, seems without rhyme or reason. The Commission and its staff need to sit back, take a deep breath, and figure out how to get to a resolution of these serious concerns with minimal chaos and upheaval, both in the courts and in its own administrative court. Right now, that is just not happening, and the resulting turmoil is saddening and a bit frightening.
This entry was posted in Administrative Proceedings, Enforcement Overreaching, SEC Enforcement, Securities Law and tagged 11th Circuit, administrative courts, administrative law judge, administrative proceeding, ALJ, ALJ Cameron Elliot, ALJ James Grimes, Appointments Clause, Article II, Cameron Elliot, constitutionality, Division of Enforcement, Eleventh Circuit, Enforcement Division, Gray Financial Group v. SEC, Gray Financial v. SEC, Hill v. SEC, In the Matter of Charles Hill, In the Matter of Timbervest LLC, James Grimes, Judge Leigh Martin May, Judge Leigh May, lawyer, legal analysis, Lillian McEwen, N.D. Ga., Northern District of Georgia, related case, SEC, SEC enforcement, securities, securities fraud, securities law, securities litigation, Timbervest, Timbervest LLC v. SEC on June 17, 2015 by Straight Arrow.

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UNITED STATES of America, Plaintiff-Appellee, v. David T. BRAUNSTEIN, Defendant-Appellant.
Before: PREGERSON, RAWLINSON, Circuit Judges, and WEINER, 1District Judge. Philip H. Stillman,Flynn, Sheridan, Tabb and Stillman, Del Mar, CA, for the defendant-appellant. Karin Hoppmann and Nina Goodman, Department of Justice, Washington, DC, for the plaintiff-appellee. David T. Braunstein and Geraldine Valdez, San Diego, CA, for trustee Gladstone.
Appellant David T. Braunstein (“Braunstein”) appeals the district court's order denying his motion for attorney's fees pursuant to the Hyde Amendment, 18 U.S.C. § 3006A. Braunstein asserts that he incurred approximately $200,000 in attorney's fees defending against sixteen federal criminal charges of wire fraud, interstate transportation of goods obtained by fraud, and money laundering. He claims that under the Hyde Amendment, the government is required to pay his attorney's fees because the prosecution was “vexatious, frivolous, or in bad faith.” We have jurisdiction pursuant to 28 U.S.C. § 1291, and, as we find the prosecution was frivolous, we now reverse.
Braunstein is a businessman who bought and sold computers, often through two companies he owned, Pacific Rim Technologies Corporation and Almacen. Braunstein maintained a computer distribution company in California and a computer retail store and refurbishing plant in Tijuana, Mexico. From September 1993 through April 1996, Braunstein bought computers from the Apple Latin America Company (“ALAC”). ALAC is a subdivision of Apple Computer, Inc. (“Apple”), an international computer manufacturer and sales company headquartered in the United States. ALAC is responsible for the sale of Apple products to Mexico, Central America, South America, and the Caribbean.
When purchasing Apple products, Braunstein dealt directly with Lopez and Carlos Valladeros (“Valladeros”), ALAC's regional sales representative for northern Latin America. In addition, Braunstein's business ventures with ALAC were overseen by Rubio.
ALAC's deals with Braunstein benefitted ALAC in the short term by increasing the sales volume of products for which there were few, if any, other buyers. But the deals hurt Apple in the long-term by undercutting its ability to generate profitable sales in the United States. ALAC's business dealings effectively put ALAC's own distributors (whose sales area was limited to Latin America and the Carribean) into direct competition with Apple's United States distributors. Moreover, Braunstein and Kaplan were selling their Apple inventory within the United States at a much cheaper price than the other United States distributors were offering, which hurt the sales of those distributors and caused confusion and resentment in the market.
In August 1996, Apple's management became concerned about the systemic underselling of Apple's United States distributors by ALAC distributors. Specifically, Apple was concerned that ALAC distributors were engaging in “gray marketing,” which involves the sale of Apple products outside the territory for which they are intended, and at a lower price than Apple would have authorized. Apple hired Kroll Associates (“Kroll”), an international private investigation firm, to look into ALAC's business practices.
․ ALAC employees were under tremendous pressure to sell large numbers of product, termed “flushing.” Although not specifically stated, the emphasis appear[s] to be on achieving sales volume rather than profit margins.
During the last year or so, ALAC has aggressively sought out new clients․ Changes in ALAC's policies have now put ALAC in direct competition with U [nited] S[tates] E[xporters], as both now sell to I[n] C[ountry] D [istributors].
There was no accountability or penalties related to the [gray] market. ALAC was under pressure to generate high sales volume, and delivered most of its product F[ree] O[n] B[oard] Miami. Once the product left [the] ALAC warehouse there was little if any effort to ensure it was exported as claimed by the customer.
ALAC does not obtain any of the reporting required under the terms of the signed agreements (which are currently expired) with its customers.
There may also be Apple employees involved in gray marketing activities.
For reasons that are somewhat unclear from the record, the United States Attorney's Office in Arizona began investigating ALAC's business deals with Braunstein in the fall of 1997.6 In August 1997, the Assistant United States Attorney (“AUSA”) assigned to the ALAC case alerted Braunstein that he had become a target of a federal criminal investigation, and Braunstein retained Michael L. Lipman (“Lipman”) as counsel.
In August, September, and October 1997, the AUSA conducted telephone interviews of several ALAC employees who had dealt directly with Braunstein, including Valladeros. The AUSA also interviewed Lopez.
It was [Valladeros's] understanding that Braunstein could sell in his area of San Diego and sell to other U.S. companies who had dealings with Apple and exported products. [Valladeros] spoke extensively with Braunstein regarding the concept and he also gave his report to Apple.
We believe that our client did not have a valid contract with Apple Latin America at any time during these transaction[s]; that Apple Latin America was aware that there were no legal restrictions on my client's resale of product; and that Apple Latin America knew, or should have known, that my client was selling the bulk of the product to a reseller in the U.S. Furthermore, Apple Latin America was more than happy to have these transactions occur because they created a material increase in their revenues.
[T]he “alternate channel” concept called for Apple Latin America to recruit United States distributors in the “border states” (primarily California, Texas and Florida). These distributors would be offered lower prices than U.S. distributors with the expectation that they could “recapture” the Latin American reseller market for ALAC․ This program was established so the U.S. distributors could not undercut the Latin American in-country distributors (and take away sales from the Apple Latin America division) and effectively “gray market” product into Latin America. Under the “alternate channel” concept, these distributors could sell to, among others, United States businesses with operations in Latin America. Thus, the program itself provided for sales of computers inside the United States. Additionally, it was anticipated by ALAC, and ALAC was willing to accept, that some “gray marketing” would occur into United States markets.
In a separate section of the letter, entitled “Apple's Knowledge Regarding Braunstein's Sales,” Lipman listed “numerous sources of information and documentation” in Apple's possession that he believed would demonstrate that ALAC knew that Braunstein was selling its product in the United States. The list included: (1) registration and warranty cards for the computers sold by Braunstein to United States distributors that were returned to Apple; (2) tracking records documenting the return of those registration and warranty cards; (3) serial number lists for all computer sales to Braunstein; (4) damage claims submitted by United States dealers who bought from Braunstein; and (5) warranty claims and requests for technical services from Braunstein's United States buyers.
The leaders of Apple Latin America at the time (namely Luis Rubio, Neil Montilla, and Al Lopez) knew they could “quietly” dump the Powerbooks (which were already excess inventory for Apple USA) with Braunstein, and be heroes. Accordingly, Apple Latin America did not care where Braunstein sold the computers, or even if he sold them.
[Lopez] wrote a series of memos regarding what he anticipated as a problem for Apple. This related to the gr[a]y marketing. He reported this problem in approximately April 1996․ There were pages and pages of hard copy documents sent between himself and Luis Rubio regarding this problem. As a result of this conflict, he was placed on a “do better” plan. During late August, 1996, [there was] a management meeting. [Management] informed [Lopez] that [it] was hiring an outside firm to look at the grey marketing problem. [It] also told him to report any of his suspicions to this third party. In January, 1997, he was taken off the “do better” plan.
AUSA: And did you explain to [Braunstein] he could not sell [Apple products] inside the United States?
VALLADEROS: Again, when I explained to him the concept, I do not recall if I was explicit to him telling him that he could not sell in the United States․ And to be honest with you, having dealt in Latin America for eight, nine years, it never crossed my mind the fact that, you know, illegally selling product into the U.S., because it didn't make sense.
AUSA: So you assumed when you were negotiating with [Braunstein] that because you're Apple Latin America, this is all going to be exported to Latin America?
This grand jury testimony by Valladeros flatly contradicted his answers to the AUSA's questions during the telephone conversation they had earlier that same day. In the telephone interview, Valladeros told the AUSA that “Braunstein could sell in his area of San Diego and sell to other U.S. companies who had dealings with Apple and exported products. “Valladeros also told the AUSA that he and Braunstein” spoke extensively” about Braunstein's United States sales and that Valladeros “gave [a] report to Apple” about these conversations.
The Government alleges that Defendant entered into a conspiracy with co-defendant Alan Kaplan to defraud Apple Computer by inducing Apple to sell them Apple products at prices substantially below what they could be purchased [for] in the United States. Defendant would purchase computers through his Mexican business entities ostensibly for sale in Mexico. However, instead of distributing and selling the products in Mexico, Defendant would instead sell the products in the United States through co-defendant Kaplan. Co-defendant Kaplan would then resell the Apple products to other Apple reseller[s] and wholesalers in the United States at prices substantially below Apple's listed wholesale price for such items.
Braunstein moved to dismiss the indictment on the ground that it did not allege a crime. The court denied the motion.
The following things are clear: Apple is a complaining witness. Apple is-or complaining party, I should say. And the defendant is entitled to discovery on items relevant to the charges in the Indictment. And lest it come as a surprise to anyone, the area of concern and dispute is that the defendant contends that Apple was both knowledgeable about and content with and indeed supportive of the notion that product directed to Apple Latin America was going to be sold at wholesale and/or retail in the United States. It is the defendant's contention that he was aware of that and participated in that what has been called from time to time, an alternative channel of distribution, unquote with the knowledge of Apple, with the knowledge of Apple Latin America, and that accordingly, his conduct could not be unlawful since it would negate intent and indeed if it was consistent with Apple's distribution practice, it would be simply a commercial interaction between the defendant's company and Apple. Now, you people can argue all day long about that. And that's what the jury will decide. If they believe Mr. Braunstein's defense, he will be acquitted.
STEELE: As I understand the question is why has the Kroll report not been turned over to Mr. Stillman.
COURT: I mean just why. Just why has it not been? Do you have it or not have it?
STEELE: I myself do not have it.
COURT: All right. Now what I want, Mr. Steele, within the hour, is to have someone order Mr. Kroll, if there is one, to send to Mr. Stillman a copy of that report with a copy of every exhibit so that he-that is no later than five o'clock today or there will be enormous economic sanctions imposed against Apple Computer Corporation. Is that clear?
On March 12, 1999, Apple still had not turned over the Kroll report or any of the other subpoenaed documents. On March 22, Stillman moved for a continuance of the trial. On March 29, the court granted the motion and reset the trial date for May 11. On the same day, the court told Apple to turn over the subpoenaed documents “to the chambers of this court” no later than April 1. Apple did not comply with the order.
On April 21, 1999, the AUSA moved for a continuance of the trial date. The court denied the motion. On May 3, 1999, the AUSA moved to dismiss the indictment without prejudice. The court granted the motion.
This was not a needle in a haystack. These documents came from Mr. Lopez's and Mr. Rubio's personnel files. There was a personnel file. It would have taken one phone call from [the AUSA]. [The AUSA] got stacks and stacks of documents, all sales invoices and so forth․ She could have made one phone call to Apple, who was cooperating with [the AUSA] for three years, providing logistic support, document support, and factual support, could have called them on the telephone and said, I want to see Lopez's personnel file.
Now [the documents] may help the defendant put on his theory of the case which is that gray marketing was a problem at Apple. But they certainly do not constitute Brady material under the Government's theory of the case which is represented in the Indictment, and that is that the defendant engaged in fraudulent activity. He made misrepresentations to Apple repeatedly about where this product was going, and therein lie[s] the fraud.
On October 3, 2000, the district court entered its five-page order denying Braunstein's motion for attorney's fees. The court concluded that the government's case was not “contrary to established law on fraud ․ [and] based on the facts as they evolved, was not frivolous.” This appeal followed.
The district court's ruling on a Hyde Amendment motion is reviewed for abuse of discretion. United States v. Lindberg, 220 F.3d 1120, 1121 (9th Cir.2000). “Under that standard, this court cannot reverse unless it has a definite and firm conviction that the district court committed a clear error of judgment.” United States v. Tucor Int'l, Inc., 238 F.3d 1171, 1175 (9th Cir.2001).
As an initial matter, the government contends that the panel lacks jurisdiction over Braunstein's appeal because it is untimely. The issue concerning which statute of limitations applies to Hyde Amendment appeals is one of first impression in the Ninth Circuit. Among the circuits that have addressed this issue, there is a split of authority. The Fourth, Fifth, and D.C. Circuits have held that Hyde Amendment appeals are civil matters governed by Federal Rule of Appellate Procedure 4(a). In re 1997 Grand Jury, 215 F.3d 430, 435-36 (4th Cir.2000); United States v. Truesdale, 211 F.3d 898, 904 (5th Cir.2000); United States v. Wade, 255 F.3d 833, 839 (D.C.Cir.2001). Pursuant to Rule 4(a), a notice of appeal must be filed “within 30 days after the judgment or order appealed from is entered.” Fed. R.App. P. 4(a)(1)(A). If the United States is a party, the time is extended to 60 days. Fed. R.App. P. 4(a)(1)(B).
The Tenth Circuit has held that Hyde Amendment appeals are criminal matters governed by Federal Rule of Appellate Procedure 4(b). United States v. Robbins, 179 F.3d 1268, 1270 (10th Cir.1999). Rule 4(b)(1)(A)(i) provides that, “[i]n a criminal case, a defendant's notice of appeal must be filed in the district court within 10 days after ․ the entry of either the judgment or the order being appealed.” Fed. R.App. P. 4(b)(1)(A).
In Truesdale, 211 F.3d at 902-03, the Fifth Circuit rejected the argument that Hyde Amendment appeals are criminal matters for three reasons. First, the court explained, the statute of limitations to file an appeal in a criminal case is short because of the significant liberty interest at stake, and “[a] motion under the Hyde Amendment ․ does not implicate the movant's liberty interest.” Truesdale, 211 F.3d at 903; see also In re 1997 Grand Jury, 215 F.3d at 435 (in Hyde Amendment motions “the criminal action itself is complete and all that remains is to determine whether[the prevailing party] can recover fees and expenses”).
Here, a motion under the Hyde Amendment is equivalent to a motion under the EAJA. In each case, the movant is seeking an award of attorney's fees based upon a litigating strategy employed by the government that, the movant claims, conflicts with statutorily defined notions of fair play. It makes little sense that the time period during which the movant may file an N[otice] O[f] A [ppeal] from the denial of such a motion should differ depending upon whether the government's potentially offensive litigation strategy was employed in a civil case or a criminal case.
Finally, the court in Truesdale noted that a practical problem might arise from characterizing a Hyde Amendment appeal as a criminal matter; namely that, generally, “the government cannot, without statutory authority, appeal from a decision in a criminal case.” Id. at 904. Thus, if Hyde Amendment motions were declared criminal matters, the movant would be entitled to appeal from an adverse ruling by the district court, but the government would not. Id. The court concluded “[w]e cannot imagine that the Congress intended such a result and are unwilling, absent clearer statutory direction, to establish precedent in this circuit lending support to such an outcome.” Id.
The Tenth Circuit's explanation in Robbins for characterizing a Hyde Amendment motion as a criminal matter is less convincing. See 179 F.3d at 1269-70. The court simply states that “[b]ecause an appeal under the ‘Hyde Amendment’ arises out of a criminal case, Fed. R.App. P. 4(b) applies and litigants must file a notice of appeal within the 10 days after the order appealed from is entered.” Id. As the Fourth Circuit stated in rejecting this reasoning, Robbins “relies upon [a] conclusory rationale.” In re Grand Jury, 215 F.3d at 435.
Because we are persuaded by the reasoning of the Fifth Circuit in Truesdale, we join the Fourth and D.C. Circuits in holding that Hyde Amendment appeals are governed by Federal Rule of Appellate Procedure 4(a). Braunstein's appeal is therefore timely because he filed his notice of appeal on October 16, 2000, thirteen days after entry of the order denying his Hyde Amendment motion.
In Tucor, we held that “[t]he plain meaning of the [Hyde Amendment] text indicates that the test is disjunctive-satisfaction of any one of the three criteria (vexatiousness, frivolousness, or bad faith) should suffice by itself to justify an award.” 238 F.3d at 1178 (emphasis added). The key terms of the Hyde Amendment, “vexatious, frivolous, or in bad faith,” are not defined in the statute.
Because the district court based its ruling on a finding that the prosecution was not frivolous in instituting the criminal proceeding against Braunstein, our analysis will focus on that prong of the Hyde Amendment. United States v. Sherburne, 249 F.3d 1121 (9th Cir.2001) stated in a footnote that “frivolous” has only an objective component. Id. at 1126 n. 4. No further guidance was given. Therefore, the Hyde Amendment's legislative history and out-of-circuit authority will be considered to provide helpful guidance in deciphering the meaning of “frivolous.” United States Representative Henry Hyde, who wrote the original version of the Amendment, explained that successful claimants under the Hyde Amendment must show that the prosecutors “are not just wrong, they are willfully wrong, they are frivolously wrong. They keep information from you that the law says they must disclose. They hide information. They do not disclose exculpatory information to which you are entitled.” 143 Cong. Rec. H7786-04, HH7791 (Sept. 24, 1997) (statement of Rep. Hyde).10 Thus, it is clear that, “[e]ven in its earliest form, the Hyde Amendment was targeted at prosecutorial misconduct, not prosecutorial mistake.” Gilbert, 198 F.3d at 1304.
In Gilbert, the Eleventh Circuit interpreted “frivolous” using the “ordinary meaning” of the word as provided in Black's Law Dictionary. Id. at 1298-99 (citing Chapman v. United States, 500 U.S. 453, 462, 111 S.Ct. 1919, 114 L.Ed.2d 524 (1991)). The court determined that “frivolous” means “groundless ․ with little prospect of success; often brought to embarrass or annoy the defendant.” Id. at 1299 (citing Black's Law Dictionary 668 (6th ed.1990)).
The Fourth Circuit has adopted the Eleventh Circuit's approach to defining “frivolous.” In re 1997 Grand Jury, 215 F.3d at 436 (citing Gilbert's interpretation with approval). In addition, in Lindberg, this court stated that the Gilbert court's approach to defining these terms was “sensible enough,” but found it unnecessary to reach the issue. Lindberg, 220 F.3d at 1125. Because the Eleventh's Circuit's approach to defining “frivolous” and “bad faith” is clear and well-reasoned, we join the Fourth Circuit in adopting it.
To show that the criminal prosecution was “frivolous,” Braunstein must demonstrate that the government's position was “foreclosed by binding precedent or so obviously wrong as to be frivolous.” Gilbert, 198 F.3d at 1304.
The AUSA obtained an indictment against Braunstein for the federal crimes of wire fraud, interstate transportation of goods obtained by fraud, and money laundering. 18 U.S.C. §§ 1343, 2314, and 1956.
A defendant is guilty of wire fraud when he: (1) engages in a scheme to defraud; (2) uses the wires to further that scheme; and (3) has a specific intent to deceive or defraud. See United States v. Garlick, 240 F.3d 789, 792 (9th Cir.2001) (interpreting 18 U.S.C. § 1343). According to the indictment, Braunstein was guilty of wire fraud because he had “use[d] interstate wire communications to wire money to Apple Computer, Inc. to pay for select Apple products purchased from Apple Latin America” and he had made those purchases by falsely representing to Apple Latin America that he would sell those products only in Mexico.
A defendant is guilty of interstate transportation of goods obtained by fraud when the defendant: (1) obtains money or property by “false or fraudulent pretenses, representations or promises”; and (2) ships that money or property in interstate commerce. See 18 U.S.C. § 2314. According to the indictment, Braunstein was guilty of this crime because he had shipped in interstate commerce ALAC computers, which he had obtained by fraud.
A defendant is guilty of money laundering when: (1) the defendant conducts a financial transaction knowing that the property involved in the transaction derives from an unlawful activity; and (2) the defendant acts with the intention of promoting the carrying on of an unlawful activity. See 18 U.S.C. § 1956(a)(1)(A)(ii). According to the indictment, Braunstein was guilty of money laundering because he used the proceeds of the computers taken by fraud from ALAC to perpetuate that fraud in future transactions.
To succeed in prosecuting Braunstein under any of the statutes outlined above, the government had to prove that Braunstein engaged in fraud; namely, that he obtained the computers from ALAC through false promises or representations. As the AUSA informed the district court during the argument on the Hyde Amendment motions, “this is a fraud case.” Thus, the government's prosecution of Braunstein depended entirely on whether it could prove that he defrauded Apple. See United States v. Oren, 893 F.2d 1057, 1062 (9th Cir.1990) (stating that “one defrauds another when he causes him to be deprive [d] ․ of property by means of false ․ representations”) (quoting Carpenter v. United States, 484 U.S. 19, 27, 108 S.Ct. 316, 98 L.Ed.2d 275 (1987)).
The evidence in the record supports the conclusion that the government's position was so obviously wrong as to be frivolous. First, there was never an enforceable contract between Braunstein and ALAC. Thus, the AUSA's allegations of fraud were dependent on oral misrepresentations by Braunstein. Significantly, none of the grand jury witnesses testified that Braunstein made any such misrepresentations. More importantly, however, the AUSA had reason to believe, based on information from four independent sources, that employees at ALAC knowingly sold computer products to distributors who resold the same products on the “gray market”; i.e., outside of Latin America, the intended territory.
Third, the AUSA had in her possession the letter from Braunstein's attorney which detailed the defense to the fraud charges and directed her to sources within Apple and ALAC. Specifically, the letter stated that Apple had records of receiving registration records, warranty forms, and damage claims for the computers sold by Braunstein to United States distributors that were returned to Apple. The letter also described records of memoranda among its employees corroborating ALAC's participation in and dependence upon gray marketing. Fourth, the AUSA had the Kroll report, which supported the allegations that ALAC employees participated in gray market deals to boost their sales volume at the expense of long-term profits for Apple.
ALAC's well-documented participation in gray marketing negated any well-founded prosecution based on fraud because ALAC could not be deceived about practices it actively endorsed. Accordingly, the government's case against Braunstein was frivolous. Braunstein is entitled to attorney's fees under the Hyde Amendment.
We hold that Braunstein's Hyde Amendment appeal was timely filed pursuant to Federal Rule of Appellate Procedure 4(a). We reverse the district court's denial of attorney's fees pursuant to the Hyde Amendment, finding that the court abused its discretion in denying Braunstein's motion. We hold that Braunstein, as the prevailing party in a criminal prosecution that was “frivolous” is entitled to an award of his attorney's fees. Accordingly, we REVERSE in part and REMAND to the district court with instructions to grant Braunstein's motion for attorney's fees, and to determine the amount to be awarded pursuant to the Hyde Amendment.
3. As Alfredo Lopez (“Lopez”), ALAC's former Director of Sales, explained in his grand jury testimony:The deal would be I need [to] sell-I have 1,000 machines of a certain type in my warehouse, and I would like to get rid of all those 1,000 machines tomorrow, and I need to offer somebody a special price to take all 1,000 machines by the following day. So [Braunstein] was interested in getting those types of products ․ Also, products that are obsolete, or were about to be obsolete, would command a much lower price because the perceived value in the market was that they were going to drop in price very fast.
4. The type of sales transacted between ALAC and Braunstein were alternately described as ALAC's method of “flushing” and “dumping” unwanted excess product.
5. The parties signed a contract on December 5, 1995, three months before Braunstein's final purchase from ALAC. However, Braunstein did not receive the executed contract until three months after his final purchase.
6. The most plausible reason for the investigation is that Apple alerted the United States Attorney's Office to the problem. The United States Attorney's Office in Arizona may have gotten involved because it was already investigating criminal fraud allegations against Kaplan. The Arizona United States Attorney's Office obtained an indictment against Kaplan in the fall of 1997 for conducting “a fraudulent rebate scheme involving Apple Powerbook 5300's.” The government has never accused Braunstein of any involvement in that rebate scheme.
7. At this point, Braunstein had not been formally charged or indicted.
8. The full text of the Hyde Amendment provides:During fiscal year 1998 and in any fiscal year thereafter, the court, in any criminal case (other than the case in which the defendant is represented by assigned counsel paid for by the public) pending on or after the date of the enactment of this Act [Nov. 26, 1997], may award to a prevailing party, other than the United States, a reasonable attorney's fee and other litigation expenses, where the court finds that the position of the United States was vexatious, frivolous, or in bad faith, unless the court finds that special circumstances make such an award unjust. Such awards shall be granted pursuant to the procedures and limitations (but not the burden of proof) provided for an award under section 2412 of title 28, United States Code. To determine whether or not to award fees and costs under this section, the court, for good cause shown, may receive evidence ex parte and in camera ․ and evidence or testimony so received shall be kept under seal. Fees and other expenses awarded under this provision to a party shall be paid by the agency over which the party prevails from any funds made available to the agency by appropriation. No new appropriations shall be made as a result of this provision.18 U.S.C. § 3006A.
9. Specifically, as a threshold matter, the defendant must show that: (1) the case against him was pending on or after the enactment of the Hyde Amendment; (2) his net worth is less than $2 million; (3) he was the prevailing party in a criminal prosecution; (4) he was not represented by assigned counsel paid for by the public; (5) his attorney's fees were reasonable; and (6) no special circumstances exist to make the award unjust. United States v. Adkinson, 247 F.3d 1289, 1291 n. 2 (11th Cir.2001).
10. The legislation was motivated by Representative Hyde and his colleagues' outrage over the prosecution of former Labor Secretary Ray Donovan and former Congressman Joseph McDade. Both Donovan and McDade were subjected to lengthy federal criminal prosecutions and ultimately were acquitted. Gilbert, 198 F.3d at 1299-1300. The intent of the legislation was to ensure that innocent people would not bankrupt themselves defending against frivolous and bad faith prosecutions. Id. at 1300 (quoting Rep. Hyde as stating, “at least, if the Government tries to bankrupt someone because of attorney's fees, they ought to pay that”).