MK Technology Associates, Ltd., Respondent; Decision and Order

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]

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