Surety Co. Must Establish Prejudice for Laches Defense Over Late Collected AD Duties, US Tells CIT

Surety company American Home Assurance Co.'s (AHAC's) affirmative defense of laches requires it to prove that it suffered prejudice given the government's delay in commencing a legal action over uncollected antidumping duties. AHAC has failed to do so and thus cannot make its laches claims, the U.S. argued in a Sept. 28 reply brief at the Court of International Trade. The surety company has failed to show either defense or economic prejudice in arguing that the case should be dismissed since it was filed beyond the statute of limitations to collect the duties under the bond, the U.S. said (United States v. American Home Assurance Company, CIT #20-00175).

In AHAC's case, two importers brought in canned mushrooms from China between 2000 and 2001. DOJ is seeking to recover a customs bond for unpaid AD duties on the mushrooms, arguing that sureties have a unique liability to pay the unpaid duties. To establish that the statute of limitations hasn't run out on collecting payments on a decade-plus-old bill, the government has argued that its issuance of a bill to the surety constitutes a reliquidation of the entries, allowing it to collect duties from the sureties at a much later date than the date of liquidation (see 2105170036).

The government is making a nearly identical argument in the case United States v. Aegis Security Insurance Company, as it's seeking to untether the six-year statute of limitations for customs bonds from the date an entry is liquidated. Aegis has argued that doing so would undermine the entire business model of sureties (see 2109210086). In the case, AHAC unsuccessfully tried to stay its case, claiming that the Aegis matter will resolve the questions of whether the government's claim for the AD duties is time barred by the six-year statute of limitations and whether "prejudice required for the laches defense may be presumed as a matter of law where there is unreasonable delay in issuing a demand against a customs bond" (see 2111290045).

Carrying on with its laches defense following an order from the court for more briefing on the claim, the surety company said that it cannot actually provide evidence of prejudice but that the case should be decided on statute of limitations grounds (see 2208030070). In its reply, the U.S. disagreed, arguing that the court should reject the attempt to "reduce a two-pronged analysis to a single element," and that the laches defense falls flat for two reasons, both of which rest on Supreme Court rulings. First, the Supreme Court has said that when Congress has imposed a statute of limitations, the laches defense cannot defeat a damages claim brought within the period prescribed by law. Second, the Supreme Court also said that the U.S. is "generally not" subject to laches defenses in "enforcing its rights."

The government argued that even in jurisdictions that took a more narrow view of this latter ruling, the laches defense is not available against the federal government when it seeks to enforce a public right. "Because this suit seeks to collect customs duties, it is enforcing a public right and therefore the affirmative defense of laches is unavailable to AHAC," the brief said.

The U.S. further said that staking a laches claim requires the movant to establish that they have been prejudiced by the late-filed action -- something AHAC failed to do. The defendant failed to prove defense or economic prejudice, the brief said. For defense prejudice, the government said that AHAC made no effort to seek records, evidence or witnesses for its defense, and it admits that there are none needed for its defense. As for economic prejudice, the U.S. said that the surety is in the same economic position it would have been had the government not brought the action within the six years after the date of deemed liquidation.

"In other words, AHAC is in the same economic position had the Government sued on the STBs at issue within six years of the date of deemed liquidation, i.e., AHAC would be responsible for payment and would have no avenue to obtain compensation in the form of indemnification, subrogation, or reinsurance. AHAC does not dispute this factual conclusion," the brief said.