Byline: Alison Maxwell

WASHINGTON — The Limited Inc. emerged victorious again Tuesday in its three-year court battle against American Textile Manufacturing Institute accusations that the apparel retailer participated in illegal transshipping activities.
The U.S. court of appeals in Cincinnati affirmed a district court judge’s earlier dismissal of the ATMI case on the grounds that the complaint “failed to state a claim” as defined by the False Claims Act. Under the False Claims Act, associations can sue on behalf of the government in fraud cases involving government matters to recover up to three times the revenue lost. The law has been used successfully to fight Medicare and defense contractor fraud, but ATMI is the first to try the act on a trade issue. Appeals judge Sandra Beckwith agreed with previous rulings that ATMI was trying to prove that the Limited sought to avoid quota limitations, not to avoid paying fees, which would have to be the cause of action under a false claims suit.
ATMI filed the lawsuit Sept. 25, 1996 in Los Angeles after conducting a year-long private investigation of the Limited and one of its suppliers, Tarrant Apparel Group. In the suit, ATMI charged that the companies filed false Customs records claiming certain apparel imports originated in Hong Kong when they were actually produced in China.
In June 1997, a Los Angeles district court judge approved a request by The Limited to change the venue to a court near its headquarters in Columbus, Ohio. After moving from Los Angeles’ ninth circuit to Cincinnati’s sixth circuit, a judge granted The Limited’s motion to dismiss.
Shortly thereafter, ATMI moved to disqualify the judge who had ruled to dismiss, because they said the judge had a conflict of interest. The judge recused himself, but refused to amend the judgment. A new judge assumed responsibility for the case and ruled that the prior judgment did not contain an error of law. ATMI appealed, and the United States participated in oral arguments in August, leading to today’s decision.
“We are gratified by this ruling,” said Samuel Fried, senior vice president and general counsel for The Limited. “We’re committed to full compliance with the letter and spirit of all legal requirements relating to the importation of goods into the U.S.”
“In addition, we require that our suppliers be vigilant about compliance with country of origin and other requirements of the U.S. Customs Service and related agencies,” he said. ATMI said it would not give up its fight.
“While we have not yet studied the details of today’s decision+we are both surprised and disappointed with the court’s decision,” ATMI executive vice president Carlos Moore said in a statement. “It appears that the court has ignored the factual underpinnings of our case and certain key legal arguments.”
ATMI said they would either take the case to the Supreme Court or request a rehearing. Importer association executives applauded the news of the decision.
“The Limited won? Good!,” exclaimed Julia Hughes, executive director of the U.S. Association of Importers of Textiles and Apparel. “We expected them to win, because we believed that the suit was frivolous. Unfortunately, they had to go through all of the motions and appeals over a long time to prove their case.”
“This is total vindication for The Limited,” Hughes continued. “I always thought it was a bad precedent to sue your customers.”
Eugene Milosh, president of the American Association of Exporters and Importers, said the ruling should have a salutary effect.
“People will now look more at the facts and try to assess what evidence there really is,” he said. “That’s good when it comes to Customs. It shows that all of these embargoes may not be justified. Customs has to back up their accusations against countries like Macau.”