United States of America v. GMI Corporation

Background

Devin Taylor sued GMI USA Corp. (GMI), Belovefine, Ltd., and Stefano Maroni under the False Claims Act, a federal law addressing fraud involving the government. Taylor alleged that the defendants participated in a scheme from 2006 through 2018 to misclassify imported footwear on customs documents, causing the government to receive less in customs duties than it was owed. She also alleged that GMI and Belovefine retaliated against her after she objected to the alleged misconduct and refused to falsify footwear declarations.

Samsung C&T America Inc. was identified as the importer of record on the customs entry documents. The United States brought a related complaint against Samsung, and Samsung agreed to pay $1 million to resolve that matter. Taylor received $210,000 as the relator share of that settlement. The settlement did not release GMI from claims Taylor might assert concerning the alleged misclassification conduct. Taylor then filed the First Amended Complaint adding Belovefine and Maroni as defendants.

The First Amended Complaint asserted three claims: reverse false claims under 31 U.S.C. § 3729(a)(1)(G) against all defendants; conspiracy to commit reverse false claims under § 3729(a)(1)(C) against all defendants; and whistleblower retaliation under § 3730(h) against GMI and Belovefine. The defendants moved to dismiss the First Amended Complaint under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim.

Court’s analysis

For the reverse-false-claims count, the court held that the complaint adequately alleged that the defendants caused false information to be used on Customs Entry Summaries and related footwear declarations, resulting in underpaid customs duties. The complaint identified 11 allegedly false statements about footwear characteristics, gave examples involving specific customs forms and footwear declarations, incorporated a list of 312 entry numbers, identified alleged participants, and described when and where the information was used.

The court rejected the defendants’ arguments that the complaint’s allegations were internally inconsistent. It found that Samsung could be the importer of record while the defendants could also have participated in importing the footwear. It also found no fatal inconsistency in allegations that the customs broker acted for both Samsung and the defendants, or that manufacturers prepared declarations that the defendants allegedly caused to be falsified or later altered. The court further concluded that allegedly opposite misrepresentations could have concerned different footwear, and therefore did not require dismissal at the pleading stage.

The court also rejected the argument that the defendants could not be liable because they were not the importer of record. The False Claims Act reaches a person who knowingly makes, uses, or causes a false record or statement to be made or used. The court found that the complaint plausibly alleged that the defendants directly supplied false information or caused manufacturers, the customs broker, or Samsung to present false information to the government.

For the conspiracy count, the court held that the complaint plausibly alleged an agreement among the defendants and other participants to reduce customs duties. The complaint identified Samsung as a participant that admitted acting in conjunction with GMI, and it alleged that overseas manufacturers and other actors were involved in the chain through which false information reached the customs broker. The complaint also identified alleged acts furthering the conspiracy, including falsifying footwear declarations and providing false information to the customs broker.

For the retaliation count, the court found that Taylor adequately alleged protected whistleblowing activity, the defendants’ awareness of that activity, and adverse action because of it. The alleged adverse action was constructive discharge, meaning that the working conditions allegedly became so intolerable that Taylor was forced to quit. The court rejected the defendants’ argument that Taylor was not employed by GMI because the complaint alleged that she was employed by both GMI and Belovefine, which it described as alter-egos of each other.

The court separately rejected the defendants’ argument that Maroni could not be liable merely because he owned or served as an officer of the corporate defendants. The complaint alleged that Maroni exercised complete control over GMI and Belovefine and personally instructed or pressured Taylor to falsify a footwear declaration, threatened her job, and tried to force her to train another employee to perform the acts she had refused to perform.

Disposition

Judge Robert W. Lehrburger denied the defendants’ motion to dismiss in its entirety. The court allowed Taylor to proceed with all three claims, but it did not decide whether the allegations are true or whether Taylor will ultimately prove them.