[Federal Register Volume 64, Number 238 (Monday, December 13, 1999)]
[Notices]
[Pages 69478-69481]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-32188]
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DEPARTMENT OF COMMERCE
Bureau of Export Administration
[Docket No. 99-BXA-04]
MK Technology Associates, Ltd., Respondent; Decision and Order
This matter is before me for review pursuant to Sec. 766.22 of the
Export Administration Regulations. On October 20, 1999, Administrative
Law Judge Harry J. Gardner issued a recommended decision and order that
granted the respondent's motion for summary dismissal of the charging
letter and ordered that the case be dismissed with prejudice to the
Bureau of Export Administration's Office of Export Enforcement. For the
reasons stated below, I am adopting the ALJ's recommended decision and
order.
The ALJ's decision sets out the factual background of this case. In
summary, prior to the issuance of the charging letter, lawyers for the
respondent and for the Office of Export Enforcement (OEE) attempted to
conclude an agreement to extend the statute of limitations so that they
could pursue further settlement negotiations. The success of that
attempt is the issue now. After the attempted extension of the statute
of limitations and after failed settlement negotiations, the Office of
Export Enforcement issued a charging letter. The respondent moved to
dismiss the charging letter claiming that the statute of limitations
barred administrative action. The ALJ agreed. He found that the
attorneys had failed to conclude an agreement to extend the statute.
The ALJ recommended that I dismiss the charging letter.
Before addressing the merits of the ALJ's recommendation, I must
deal with OEE's request that I remand the case to the ALJ to consider
OEE's submission. The respondent filed its motion to dismiss the
charging letter with the ALJ on August 18, 1999. The ALJ issued his
recommended decision and order on October 20. OEE did not file a
response to the motion with the ALJ. Neither counsel cites a rule that
sets a time limit on OEE's response to the motion.
OEE now asks that I remand this case to the ALJ so that he may
consider OEE's position. The respondent opposes this request. It argues
that OEE had its chance to respond, that there are no disputed issues
of fact, and that the respondent should not be put to the expense of
further litigation because of the dereliction of OEE's attorneys in
allowing two months to pass without responding to the motion.
I decline to remand this case to the ALJ since that would serve no
purpose. First, there are no disputed issues of fact. This issue is
about drafts of the ``agreement'' that purported to extend the statute
of limitations and faxes of those drafts. Those drafts and faxes are in
the record and neither side questions their authenticity. Not only are
there no disputes on the facts, OEE adds no new facts that the ALJ did
not consider. There is no reason to believe that the ALJ would come to
any different conclusion. Finally, I have carefully considered OEE's
submission to me. Giving it all possible weight, I cannot find a way to
agree with its contention that the ALJ erred in concluding that there
was no agreement to extend the statute of limitations.
Since there appears to be no rule requiring OEE to respond to the
motion in a particular time, and since the ALJ does not appear to have
set a briefing schedule, I see no justification to ``punish'' OEE or,
as the respondent requests, preclude it from opposing the dismissal
now. I will not, however, punish the respondent for OEE's inaction by
imposing upon the respondent (or the ALJ for that matter) further
unnecessary litigation.
On the merits of the issue, I agree with the ALJ and only add a few
comments. The crux of the ALJ's decision is that no ``valid enforceable
agreement with respect to the extension of the statue of limitations''
was concluded. Counsel for OEE argues that an agreement was reached,
and that the language changes to the agreement that she made
unilaterally were ``minor textual edits'' that did not materially
change the burdens of the respondent under the agreement. I do not have
to decide whether a minor change to the language of the agreement would
have voided the respondent's ``offer'' to extend the statute of
limitations. These changes were not ``minor.''
Counsel for OEE is correct that the language she proposed has
similar meaning to the language that counsel for respondent proposed.
But in the circumstances of this negotiation any difference in language
was material. This language went to the heart of what violations were
covered by the statute extension. Counsel for the respondent was very
concerned with this language. He changed the language that OEE
originally offered and even took the time to retype the entire
document. He was surrendering his client's right to bar administrative
punishment. Counsel for respondent immediately objected when he found
out that his language had been changed. I cannot call the changes
``minor'' or ``immaterial.''
The most probative evidence that the exact language was important
to the parties and not immaterial were the actions of counsel for OEE
herself. If the language difference was so immaterial why did she
reject the respondent's clear, unassailable agreement to extend the
statue and then make her own changes to respondent's language? Why did
she bother to rephrase and retype the document for something ``minor''
and ``immaterial''? How can OEE now argue that this is not a
significant matter when the record clearly shows that, at the time,
OEE's attorney was adamant in not accepting the respondent's language?
It is clear that each attorney wanted her or his exact language.
Neither got it. There was no agreement.
A paragraph that remained the same in all drafts of the agreement
read:
In the event of a dispute between the parties in any
administrative proceeding or judicial action between the parties
with respect to the statute of limitations, this Agreement may be
introduced into evidence to show the parties' intent regarding the
matters encompassed herein.
The question is, which copy of the agreement do we now look to? The
copy that OEE's counsel said she was ``purging''? The copy that
contains OEE counsel's unapproved edits of respondent's language and
bears respondent's counsel's signature from an earlier, different
draft? Or the copy OEE's counsel ``accepted'' after the statue had run
but whose text OEE
[[Page 69479]]
counsel had told counsel for respondent that she rejected?
This is more than a question of contact law. My decision in this
case will guide Bureau of Export Administration employees in dealing
with the public. Even if the changes OEE's counsel made without
consulting respondent's counsel would not have prevented the formation
of a commercial contract, they prevent an extension of the statute of
limitations in this bureau. In the Bureau of Export Administration, at
least, we do not change someone's words without his consent. This
agreement could have had handwritten portions, it could have been
faxed, it could have been e-mailed. But both the parties had to have
agreed on all the same words. It is important that agreements to which
this agency is a party are clear, unambiguous, and agreed to by all
sides.
I hasten to add that there is no evidence in the record that the
respondent's counsel was operating in other than good faith. On two
occasions before the statute ran, he sent documents to counsel for OEE
that, had the latter not rejected them, would have extended the
statute. But even if counsel had been acting in bad faith, OEE's remedy
was simple. It should have filed a charging letter.
The result in this case should encourage counsel to treat the
statute of limitations with more respect. The Office of Export
Enforcement should review its procedures for ``old'' cases such as
this. The parties here were trying to extend the statute for the fourth
time. While I understand the value of resolving cases by settlement,
and I agree that it is appropriate to extend the statute of limitations
to facilitate that, such extensions should not be infinite.
Order
It is hereby ordered that the ALJ's Recommended Decision and Order
Granting Respondent's Motion for Summary Dismissal is approved.
It is further ordered that the charging letter dated March 31,
1999, that the Office of Export Enforcement filed against ``MK
Technology Inc.'' \1\ dismissed with prejudice against the Office of
Export Enforcement.
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\1\ The charging letter was issued against ``MK Technology,
Inc.'' On August 19, 1999, counsel for the respondent indicated that
the respondent's correct name is ``MK Technology Associated, Ltd.''
The pleadings after that point use the name MK Technology
Associates, Ltd. The dismissal is effective as to the respondent
under either name.
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It is further ordered that the Decision and Order and the ALJ's
Recommended Decision and Order Granting Respondent's Motion for Summary
Dismissal shall be served on the parties and published in the Federal
Register. This is the final agency action on this matter.
Entered this 7th day of December, 1999.
William A. Reinsch,
Under Secretary for Export Administration.
Recommended Decision and Order Granting Respondent's Motion for
Summary Dismissal
On August 18, 1999, MK Technology Associates, Lt. (``Respondent''),
filed a Motion for Summary Dismissal pursuant to the Bureau of Export
Administration's (``BXA'' or ``Agency'') procedural regulations
codified at 15 CFR 766.8 (1998), arguing that commencement of this
administrative action is time barred by the applicable five-year
statute of limitations established in 28 U.S.C. 2462. The Respondent's
Motion for Summary Dismissal is supported by exhibits that all show
that BXA Counsel, Mi-Yong Kim, Esq., attempted to secure a waiver of
the statute of limitations on several occasions. After receiving a copy
of the Respondent's Motion for Summary Dismissal, Agency counsel
contacted the undersigned Judge and informed him that a response would
be filed. To date, Agency counsel has failed to file a response.
After careful review of the applicable law and the exhibits
submitted by Respondent's counsel in support of the Motion for Summary
dismissal, said motion is hereby Granted.
(i)
The facts and procedural history of this case are as follows: \1\
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\1\The facts and exhibits as presented by the Respondent in
support of the Motion for Summary Dismissal are accepted and
incorporated by reference.
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In September and October of 1993, MK Technology allegedly committed
three violations of the Export Administration Act of 1979, as amended
and codified in 50 U.S.C. app. secs. 2401-2420 (1991 & Supp. 1998) \2\
and the regulations promulgated thereunder currently codified at 15 CFR
parts 730-774 (1998).\3\ While the case was pending investigation,
several statute of limitations waiver agreements were executed between
September 1998 and January 1999, BXA counsel, Mi-Yong Kim and
Respondent's previous counsel, Michael X. Marinelli, Esq. and Paul T.
Luther, Esq. of the law firm of Baker & Botts, LLP. (Respondent
Exhibits 1A-4B).\4\ The last statute of limitation waiver agreement
signed and executed on January 7, 1999 by Mr. Luther on behalf of MK
Technology suspended the running of the statute of limitations in this
case until February 16, 1999. (Respondent Exhibit 4B).
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\2\ Although the Export Administration Act of 1979 expired on
August 20, 1994, the statute and the applicable regulations remain
in effect pursuant to:
(a) Executive Order 12924 located at 3 CFR, 1994 Comp. 917
(1995);
(b) Presidential Notices of August 15, 1995 located at 3 CFR
1995 Comp. 501 (1996), August 14, 1996 located at 3 CFR, 1996 Comp.
298 (1997), August 13, 1997 located in 3 CFR, 1997 Comp. 306 (1998),
and August 13, 1998 published in 63 FR 44121 (August 17, 1998); and
(c) The International Emergency Economic Powers Act, amended and
codified at 50 U.S.C.A. 1701-1706 (1991 & Supp. 1998).
\3\ the violations alleged in this case occurred in 1993. Since
that time, the 1993 version of the Export Administration Regulations
that was codified in 15 CFR parts 768-79 have been reorganized and
restructured. The current regulations are codified at 15 CFR parts
730-74 (1998) and establish the procedures that apply in this
matter.
\4\ With respect to Respondent Exhibit 1A, it appears that
Respondent's present counsel, Anthony P. Bisceglie, Esq., failed to
include the proposed agreement that extended the statute of
limitations until October 15, 1998. Instead, the proposed agreement
that waived the statute of limitation until December 15, 1998 was
inadvertently attached to the ``Fax Cover Page'' sent by BXA Counsel
to waive the statute of limitations until October 15, 1998.
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Somethime thereafter, the Respondent terminated the attorney-client
relationship with Mr. Marinelli and Mr. Luther and hired Anthony P.
Bisceglie, Esq., as legal counsel.
On February 11, 1999, BXA legal counsel, Mi-Yong Kim sent Mr.
Bisceglie a proposed statute of limitations waiver agreement that would
further extend the running of the statute of limitations until March
31, 1999. (Respondent Exhibit 5A).\5\ Mr. Bisceglie refused to sign
this agreement because of concerns that the language was overbroad and
there were questions concerning the scope and validity of the prior
statute of limitations waiver agreements executed by Respondent's
previous counsel. (Respondent Exhibit 1B).\6\
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\5\ The agreement was not attached and included as part of
Respondent Exhibit 5A, but there is a Fax Cover Page sent from Mi-
Yong Kim of BXA to Mr. Bisceglie which shows an intent to extend the
statute of limitations until March 31, 1999.
\6\ Mr. Bisceglie states that BXA's failure to respond to
Respondent's previous counsel's cover letter dated September 4,
1998, that conditioned MK Technology's agreement to the extension of
the statute of limitation on the ``understanding that the extension
applies only to investigation of matters described in its voluntary
disclosure letter of April 7, 1997'' indicates that the parties did
not have a ``meeting of the minds'' with respect to the initial
agreement. Thus, according to Mr. Bisceglie, a valid binding
agreement was never established in accordance with contract
principles under Restatement (Second) of Contracts Sec. 39, cmt. b.
(See, Respondent Exhibit 1B).
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Instead, on February 12, 1999, Mr. Bisceglie sent to Ms. Kim, a
retyped
[[Page 69480]]
signed counter-proposal that specifically limited the waiver of the
statute of limitations until March 31, 1999 to violations included in
BXA's September 29, 1998 pre-charging letter. On that same day, based
upon a telephonic voice mail message left by Ms. Kim in which she
stated that she would ``purge'' the retyped counter-proposal, Mr.
Bisceglie made handwritten editorial changes to the agreement that was
sent by Ms. Kim on February 11, 1999. The agreement containing the hand
written editorial changes was signed and returned to Ms. Kim on
February 12, 1999. (Respondent Exhibits 5 and 6).
On February 16, 1999, the day the January 7th agreement was to
expire, another proposal with similar handwritten editorial changes was
initialed and signed by Mr. Bisceglie and sent to Ms. Kim. (Respondent
Exhibit 7). Ms. Kim retyped the first page of this agreement, edited
the Respondent counsel's proposed changes, and sent the document
containing both signatures to Mr. Bisceglie. (Respondent Exhibit 8).
Mr. Bisceglie immediately responded. In a letter dated February 17,
1999, he noted that the first page of the agreement was changed and Ms.
Kim had taken the ``liberty of simply affixing a signature page
containing'' his signature from a previous draft before he could review
and execute the agreement in final form. Mr. Bisceglie requested
another copy of the unsigned agreement for review and approval by MK
Technology. (Respondent Exhibit 9). Instead of sending him another copy
of the same agreement, Ms. Kim sent and signed the handwritten version
of the agreement that was submitted by Mr. Bisceglie on February 12,
1999. (Compare Respondent Exhibit 5 with Exhibit 10). In the Fax Cover
Page accompanying the agreement, Ms. Kim noted, ``The agreement * * *
faxed to (Mr. Bisceglie on February 16, 1999) incorporated the changes
* * * requested and the sentence was edited to make it more clear. The
Department did not materially modify [the] proposed changes to the
agreement.'' (Respondent Exhibit 10).
Thereafter, BXA offered to settle the matter against MK Technology
and avoid administrative proceedings. The Agency also offered to
facilitate an internal review of the matter by delaying the issuance of
a formal charging letter on a condition that MK Technology agrees to
waive the statute of limitations.
In a letter dated March 31, 1999, MK Technology rejected BXA's
offer of settlement and refused to waive the statute of limitations
defense, noting that the Agency had failed to secure a valid waiver
before the expiration of the statue of limitations on February 16,
1999. (Respondent Exhibit 11). Mr. Bisceglie also informed Ms. Kim that
MK Technology affirmatively denies that the Export Administration
regulations were violated and further informed her that his clients
will seek further ``Departmental review'' if BXA decides to initiate
enforcement proceedings. Id.
Later that same day, BXA filed a Charging Letter with the United
States Coast Guard Administrative Law Judge Docketing Center initiating
an administrative action against the Respondent. The administrative
action was brought by BXA pursuant to applicable export laws and
regulations, authorization from the U.S. Office of Personnel Management
under 5 U.S.C. 3344 and 5 CFR 930.213, and a Memorandum of
Understanding entered into between the United States Coast Guard and
Bureau of Export Administration.
In the Charging Letter dated March 31, 1999, the Agency seeks
imposition of administrative sanctions, including a maximum civil
penalty, denial of export privileges, and exclusion from practice
before BXA against MK Technology for allegedly violating three sections
of the former Export Administration Regulations codified at 15 CFR
Parts 768-779 (1993). Charges 1 and 2 state that the Respondent's
codified at 15 CFR Parts 768-779 (1993). Charges 1 and 2 state that the
respondent's allegedly violated Secs. 787.4(a) and 787.6 by exporting
certain computer equipment on or about September 24, 1993, to China
Xiao Feng Technology & Equipment while knowing or having reason to know
that the shipment was contrary to the conditions of their license.
Charge 3 provides that the Respondent allegedly violated Section 787.10
of the former regulations by permitting a third party to export certain
computer equipment from the United States to the People's Republic of
China under its BXA license without prior written approval from the
Office of Export Licensing.
On April 22, 1999, the Respondent filed an answer denying the
charges together with a request for production of documents. In its
answer, Respondent affirmatively stated that this present action is
time barred by the applicable statute of limitations.\7\
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\7\ The respondent also raised constitutional challenges to the
validity of the Export Administration Act and claims that the terms
of the BXA licenses allegedly violate the Due Process Clause of the
5th Amendment to the United States Constitution. The Respondent's
constitutional arguments are not addressed herein. Moreover, even if
the Respondent had included the constitutional arguments in the
motion for summary dismissal, it is well settled that Administrative
law Judges lack authority to rule on such issues.
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The above captioned matter was subsequently assigned to the
undersigned Judge by the Chief Administrative Law Judge for the United
States Coast Guard on June 18, 1999.
(II)
Under 15 CFR 766.8, an Administrative Law Judge may issue a summary
decision and order where there existed no genuine issue of material
fact and the moving party is entitled to a summary decision as a matter
of law. Substantive law dictates which facts are material and only
those disputes that affect the outcome of the case will properly
preclude the entry of summary decision. See, Anderson v. Liberty Lobby,
Inc, 477 U.S. 242, 247 (1986) (interpreting Fed. R. Civ. P. 56(c),
which authorizes the granting of summary judgement where there exists
no genuine issue of material fact and where the moving party is
entitled to judgement as a matter of law).
In ruling on a summary decision motion, all reasonable inferences
are viewed in a light most favorable to the nonmoving party. Id. at
255. The moving party bears the initial burden of identifying those
portions of the pleadings, depositions, answers to interrogatories, and
admissions on file, together with affidavits, that demonstrate the
absence of a genuine issue of material fact. See, Celotex Corp. v.
Catrett, 477 U.S. 317, 323-24 (1986) (interpreting Fed. R. Civ. P.
56(c)). Once the moving party establishes that there exists no genuine
issue of material fact, the burden shifts to the nonmoving party to set
forth specific facts that establish a genuine issue for hearing. See,
id; Anderson, 477 U.S. at 256. Mere conclusory allegations are
insufficient to defeat a summary decision motion. Anderson, 477 U.S. at
256. The nonmoving party must adduce sufficient evidence to support a
favorable decision. Id. at 248. Moreover, summary decision will be
granted against ``a party who fails to make a showing sufficient to
establish the existence of an element essential to that party's case,
and on which that party will bear the burden at (the hearing).''
Celotex, 477 U.S. at 322.
The pivotal issue in this case is whether a valid enforceable
statute of limitations waiver agreement exists between the parties. If
this case were to go to hearing, the burden of proving the
[[Page 69481]]
existence and validity of the waiver would lie with BXA. See generally,
U.S. v. McGaughey, 977 F.2d 167, 1071 (7th Cir. 1992), cert. denied,
507 U.S. 1019 (1993). Absent a valid waiver, the administration action
in this matter is time-barred. 28 U.S.C. 2462; see also, Henke v. U.S.,
60 F.3d 795, 798 n.3 (Fed. Cir. 1995).
Section 2462 of Title 28 of the United States Code imposes a five-
year statute of limitation on the commencement of enforcement
proceedings brought by BXA under the Export Administration Act. See,
U.S. v. Core Laboratories, Inc., 759 F.2d 480, 481 (5th Cir. 1985). It
is well-settled that an individual under investigation may expressly
waive the statute of limitations defense in hopes that further
discussion may result in a more favorable disposition of the case or
prevent the Government from bringing an enforcement action. See, U.S.
v. Spector, 55 F.3d 22, 24 (1st Cir. 1995) (interpreting criminal
statute of limitation); U.S. v. Del Percio, 870 F.2d 1090, 1093 (6th
Cir. 1989) (interpreting criminal statue of limitation). In order for
the waiver of the statute of limitations to be valid, however, it must
be knowingly and voluntarily made by the Respondent. See, Spector, 55
F.3d at 24; U.S. v. Wild, 551 F.2d 418, 423, (D.C. Cir. 1977), cert.
denied, 431 U.S. 916 (1977). Moreover, where, as in this case, the
waiver of the statute of limitations has been reduced to writing,
traditional contract principles often apply. See. Spector, 55 F.3d 22;
Reich v. Eveready Flood Control Corp., No. 94 C 2331, 1995 U.S. Dist.
Lexis 10397 (N.D. Ill., Jul. 25, 1995); but see, McGaughey, 997 F.2d at
1072 (ruling that the statute of limitations waivers are not contracts
in cases where the federal government is collecting tax deficiencies
and tax liability has been previously established).
For an enforceable agreement to exist between two parties, there
must be mutual assent by the contracting parties on the essential terms
and conditions of the subject about which they are contracting. See,
Reich, 1995 U.S. Dist. Lexis 10397, at *7; see also, Reinstatement
(Second) of Contracts Sec. 17. The manifestation of mutual assent takes
the form of an offer or proposal by one party followed by acceptance by
the other party. Restatement (Second) of Contracts Sec. 22., cmt. a. If
a party, in anyway, changes or modifies the terms of an offer or
proposal it constitutes a rejection of the original offer or proposal
and becomes a counteroffer that must be accepted by the original
offeror before an enforceable agreement is formed. Restatement (Second)
of Contracts Sec. 39, cmt. a. See, Venture Assoc. Corp. v. Zenith Data
Sys. Corp., 987 F.2d 429, 432 (7th Cir. 1993) (offeree's returning of
proposed agreement with minor, non-substantive changes added in writing
constituted a counteroffer); United States Can Co. v. NLRB, 984 F.2d
865, 869 (7th Cir. 1993) (striking out a single term of an offer
creates a counteroffer, which the other party must accept or there is
no contract). Once a party has rejected an offer, that party cannot
afterwards revive the original offer by tendering acceptance of it.
Minneapolis & St. Louis Ry. v. Columbus Rolling Mill, 119 U.S. 149, 151
(1886); Shaffer v. BNP/Cooper Neff, Inc., Civil Action No. 98-71, 1998
U.S. Dist. Lexis 14013, at *14 (E.D. Pa., Sept. 4, 1998); Hicks Road
Corp. v. Marathon Oil Co., No. 94 V 3409, 1994 U.S. Dist. Lexis 9095,
at *6 (N.D. Ill., Jul. 6, 1994).
In this case, the Respondent has established that a valid
enforceable agreement with respect to the extension of the statute of
limitations was never created between the parties. At best, the parties
were still negotiating the terms of the statute of limitations waiver
agreement. BXA counsel's attempt to create an enforceable agreement by
retyping the first page of the February 16, 1999, proposed statute of
limitation waiver agreement and affixing her signature to a signature
page containing Respondent's counsel's signature taken from a previous
draft agreement is improper. (See, Respondent Exhibit 7 & 8). This is
especially true where Respondent's counsel was not initially consulted
and was not given an opportunity to review the retyped agreement, and
obtain approval from his client, MK Technology. (See Respondent Exhibit
9). The fact that the February 16, 1999 agreement did not ``materially
modify'' the agreement that Respondent counsel signed on February 12,
1999 is of no consequence. Furthermore, once BXA counsel rejected the
February 12, 1999 statute of limitation waiver agreement that was
signed by Respondent's counsel, Ms. Kim could not later revive the
offer by signing the agreement on February 17, 1999, a day after the
statute of limitations period expired. (See, Respondent Exhibit 10).
Based on Respondent's evidence and BXA's failure to rebut or
otherwise respond to the Motion for Summary Decision, the Undersigned
has no choice but to find that the Respondent has established that
there is no genuine issue of material fact that this matter is time
barred by the applicable statute of limitations.
Order
Wherefore it is hereby ordered that the Respondent's Motion for
Summary Decision be granted.
It is hereby further ordered that the above-captioned matter be
dismissed with prejudice against the Bureau of Export Administrative
refiling this case at a later date.
So ordered:
Dated this 20th day of October 1999, Baltimore, Maryland.
Harry J. Gardner,
Administrative Law Judge, United States Coast Guard.
[FR Doc. 99-32188 Filed 12-10-99; 8:45 am]
BILLING CODE 3510-DT-M
