## Facts

- The United States filed a civil penalty action in the U.S. Court of International Trade alleging Tenacious Holdings, Inc. negligently misclassified imported work gloves and underpaid duties, seeking roughly $50,000 in penalties and unpaid duties.
- A related classification action involving the same gloves was pending in the same court.
- In the penalty action, the parties filed cross-motions for partial summary judgment addressing the threshold tariff-classification question, while several discovery disputes remained pending.
- The tariff provision implicated in the classification dispute had expired in 2009, limiting any forward-looking value of a judicial ruling for future entries.
- Tenacious sought referral to court-annexed mediation, arguing the low amount in controversy made settlement efficient and that mediation could avoid a potential advice-of-counsel defense that might require waiver of attorney-client privilege and affect the related classification case.
- The United States opposed mediation as premature, contending that discovery and threshold legal issues should be resolved first and that it had an institutional interest in a judicial decision on classification and penalties.

## Issues

1. Whether the Court of International Trade, under USCIT Rule 16.1 and its case-management authority, should order a contested referral to court-annexed mediation in a customs penalty action.

## Decision

- The court granted Tenacious’s motion and ordered referral to court-annexed mediation.
- The court found the case presented an unusual combination of circumstances making mediation appropriate despite the government’s objection.
- The court did not decide the merits of tariff classification, negligence, or penalties; it resolved only the mediation-referral request.

## Legal Principles

- USCIT Rule 16.1 authorizes the Court of International Trade to refer cases to mediation and affords the judge broad discretion to do so during the pendency of an action.
- A contested mediation referral is discretionary and appropriate only when the court determines that the likely benefits exceed risks such as delay, added expense, or loss of the value of an authoritative judicial ruling.
- In assessing whether to order mediation, the court may consider: (1) the amount in controversy relative to expected litigation costs; (2) whether a judicial decision would provide meaningful guidance for future conduct; (3) whether the nature of the claims is amenable to negotiated resolution; and (4) whether confidentiality interests (including potential privilege-waiver consequences tied to anticipated defenses) support early ADR.
- Where the governing tariff provision has expired and the amount at stake is modest, the government’s interest in obtaining a precedential classification decision may be reduced for purposes of the mediation referral analysis.

## Conclusion

The court exercised its discretion under USCIT Rule 16.1 to order court-annexed mediation over the government’s objection, concluding that the modest monetary stakes, limited precedential value of a classification ruling due to an expired provision, and efficiency and privilege-related considerations made mediation an appropriate case-management step.


United States v. Tenacious Holdings, Inc., 6 F. Supp. 3d 1374 (Ct. Int’l Trade 2014)