In a pending case, Island Industries Inc. v. Sigma Corp., the US Court of Appeals for the Ninth Circuit is poised to decide whether district courts have subject matter jurisdiction over False Claims Act qui tam actions that are based on alleged avoidance of customs duties.
Federal district courts generally have jurisdiction over False Claims Act (FCA) claims brought by either the United States or a qui tam relator. 31 USC § 3732(a). However, in FCA cases based on violations of customs laws and regulations—which are appearing with increasing frequency—that general grant of jurisdiction clashes with 28 USC § 1582(3), which provides that the “Court of International Trade (CIT) shall have exclusive jurisdiction of a civil action which arises out of an import action and which is commenced by the United States . . . to recover customs duties.”
As the typical allegation in FCA cases based on violations of customs laws is that the defendant committed a reverse false claims violation (under FCA Section 3729(a)(1)(G)) by avoiding payment of customs duties, this jurisdictional conflict has major import for the litigation—and potentially for the viability—of these cases. Now, for the first time in nearly 20 years, a federal circuit court of appeals is poised to address it.
Pending before the US Court of Appeals for the Ninth Circuit is Island Industries Inc. v. Sigma Corp., Case No. 22-55063 (9th Cir.), a non-intervened qui tam action in which the relator, Island Industries,...
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