Recent Ninth Circuit Decision Empowers Whistleblowers to Pursue Customs Fraud Cases in Districts with Some of the Busiest Ports
The United States is the world’s largest importer, bringing in an estimated $2.49 trillion worth of goods and services in 2024, following $3.85 trillion in 2023. Much of this trade flows through just a handful of U.S. ports, especially those on the West Coast. Against this backdrop, the Ninth Circuit’s recent decision in U.S. ex rel. Island Industries, Inc. v. Sigma Corp., a qui tam customs fraud case resulting in a $26 million jury verdict, marks a significant development in both False Claims Act enforcement and jurisdictional clarity.[1]
On June 23, the Ninth Circuit affirmed the jury’s verdict and clarified that whistleblower-initiated customs fraud cases can be properly brought in federal district courts in key jurisdictions like California and Washington, where some of the nation’s busiest ports are located.[2] Specifically, the Ninth Circuit held that Sigma Corp., the defendant, had an “obligation” under the False Claims Act to pay anti-dumping customs duties.[3] The Ninth Circuit also rejected Sigma’s argument that because it was “objectively reasonable” to doubt whether its imports were subject to such duties, the jury should not have found scienter. This defense, according to the Ninth Circuit, “is foreclosed by the Supreme Court’s decision in [U.S.] ex rel. Schutte v. SuperValu Inc., 598 U.S. 739 (2023).”[4]
In 2024, for example, the Port of Los Angeles handled the most containers—over 5.3 million twenty-foot equivalents “TEUs”, while the Port of Long Beach, also in California, handled the second most—almost 4.7 million TEUs. The Port of Oakland ranked eighth with over 940,000 TEUs, while the Port of Tacoma and the Port of Seattle were ninth and tenth with approximately 830,000 TEUs and 562,000 TEUs, respectively.[5]
These ports also feature at the top of the list based on the value of the imports they processed in 2024. Together, the Ports of Los Angeles and Long Beach processed more than $345 billion of imports—more than double the amount for the Port of New York and New Jersey. Similarly, on a combined basis, the Ports of Seattle and Tacoma ranked seventh (over $51 billion), and the Port of Oakland ranked eighth (over $31 billion).[6]
Before Island Industries, defendants in qui tam customs fraud cases in the Ninth Circuit frequently relied on an earlier Ninth Circuit decision, United States v. Universal Fruits, 370 F.3d 829 (9th Cir. 2004), to contend that 19 U.S.C. § 1952 vests exclusive jurisdiction over government-initiated customs fraud cases in the Court of International Trade.[7]
Island Industries, however, clarifies that qui tam customs fraud cases do belong in federal district courts. Specifically, the court held that neither 19 U.S.C. § 1952 nor Universal Fruits applies to qui tam customs fraud cases because whistleblowers, not the government itself, initiate these cases.[8]
With this critical clarification, whistleblowers can pursue qui tam customs fraud cases in three jurisdictions—the Central District of California, the Northern District of California, and the Western District of Washington—that host four of the busiest ports in America.[9]
[1] U.S. ex rel. Island Industries, Inc. v. Sigma Corp, 142 F. 4th 1153 (9th Cir. 2025).
[2] The Ninth Circuit amended and superseded its June 23 order on August 21, 2025, reaching the same conclusions as the original. See Island Industries v. Sigma Corp., 2025 WL 2422455 (9th Cir. 2025).
[3] See id. at 1166.
[4] See id. at 1167-68.
[5] See https://www.supplychain247.com/article/north-america-top-20-container-ports-2024.
[6] See https://www.pmsaship.com/maritime-insights-blog/breaking-down-americas-biggest-container-ports-2024-trade-insights.
[7] See 370 F.3d at 836-37.
[8] See Island Industries, 142 F. 4th at 1164-66.
[9] Port of Los Angeles, Port of Long Beach, Port of Seattle, and Port of Oakland.
This piece was written by Li Yu, Partner at Bernstein Litowitz Berger & Grossmann.
