US Asks for Rule 37 Sanctions in Duty Evasion Case Against Steel Hanger Importer
The U.S. sought Rule 37 sanctions Oct. 29 against an importer of steel hangers after he failed to appear for depositions in several civil duty evasion cases. It asked the Court of International Trade for default judgments in all three cases (United States v. Zhe “John” Liu, CIT #s 22-00215, 23-00116, 24-00132).
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Alternatively, it asked for either the allegations in its three complaints to be admitted, and evidence against them forbidden; for defendant Zhe “John” Liu to be prohibited from providing evidence; or, if Liu did agree to sit for a deposition, to extend discovery to Jan. 30 and require Liu to pay attorney’s fees and reasonable expenses for the delay.
And it acknowledged that the court had granted John Liu’s motion to quash its subpoena of Chen Liu, John Liu’s daughter (see 2510290043). It said that, should any of the requested remedies be granted, it wouldn’t need to seek another deposition of Chen Liu regardless.
Rule 37 of the Federal Rules of Civil Procedure allows sanctions for, among other things, failing to appear at a deposition. Sanctions may include accepting facts as true, barring the party from supporting or opposing certain claims or introducing certain evidence; striking pleadings; staying proceedings; dismissing a proceeding; or rendering a default judgment against the party.
The government’s cases, which seek more than $17 million in total damages (see 2306080027, 2207220042 and 2407310047), allege John Liu operated three shell companies: GL Paper Distribution, AB MA Distribution Corporation and CEK Group. The three companies imported the steel hangers from China, but claimed they had been manufactured in Malaysia, India and Thailand. A fourth company, also operated by John Liu, NC Supply, Inc., would then purchase the hangers and sell them to unaffiliated U.S. customers, the government said.
John Liu has denied the allegations, disavowing any connection with GL Paper or AB MA and, though acknowledging his ownership of CEK Group, insisting that company’s hangers were made in Thailand, the U.S. said.
First, the government said John Liu’s second round of responses to U.S. production requests had been due Oct. 30. It also said it had been attempting to schedule depositions with both John Liu and Chen Liu, who are currently in China, for several weeks. It informed John Liu on Oct. 6 that it would be subpoenaing him for a virtual deposition on Oct. 27. Liu responded on Oct. 14 that he would not be able to sit for a virtual deposition because China prohibits it.
On Oct. 20, the government followed up asking if John Liu would be traveling to a neighboring country to participate in the Oct. 27 deposition. When David Craven, counsel for John Liu, responded that he only represented John Liu and CEK, not “any of the other parties to this matter” -- seeming to imply that John Liu was not acknowledging anything related to GL Paper and AB MA -- it followed up warning that it would argue to the court that John Liu had “knowingly waived his right to present evidence via 30(b)(6) deposition regarding AB MA and GL Paper.”
John Liu responded later that day, Oct. 21, saying that he couldn’t attend. He also claimed the depositions had been scheduled “in bad faith” and that GL Paper and AB MA hadn’t been notified that they were required to attend the depositions.
The U.S. asked for confirmation of his statements, then, not receiving a response, followed up again Oct. 24. Because it couldn’t reach John Liu, it then subpoenaed Chen Liu in order to “speak to someone located in the United States related to these events.” It only later learned, based on the representations of John Liu, that Chen Liu was also out of the country.