On March 26, 2010, Judge Timothy C. Stanceu of the United States Court of International Trade dismissed with prejudice a suit seeking up to a billion dollars in damages and alleging various common law claims against a number of surety insurers, including an affiliate of Simpson Thacher client Swiss Re that wrote the largest amount of the customs bonds at issue in the case. The case continues against the United States government, which has also moved to dismiss the claims against them.
On April 7, 2009, domestic producers of honey, mushrooms, crawfish and garlic filed a putative class action in the United States Court of International Trade against the United States, the Department of Commerce, U.S. Customs and Border Protection, and the surety insurers. Plaintiffs alleged that the surety insurers issued single-transaction customs bonds guaranteeing the payment of anti-dumping duties assessed on imports of honey, mushrooms, crawfish and garlic by undercapitalized Chinese "new shippers" and later failed to pay such duties as required after the Chinese "new shippers" themselves failed to pay the anti-dumping duties. Plaintiffs contended that they were third-party beneficiaries of the bonds issued by the surety insurers, and were therefore entitled to effectively recoup antidumping duties directly from the sureties themselves. The complaint included claims for breach of contract, negligence and unjust enrichment, and sought monetary damages and equitable relief.
In granting the surety insurers’ motion to dismiss, Judge Stanceu adopted the arguments advanced by the sureties in their entirety. Judge Stanceu found that the plaintiffs were not third-party beneficiaries of the bonds because the statutes and implementing regulations manifest no explicit or implicit intent to provide a direct benefit to domestic producers. Thus, plaintiffs lacked standing to assert rights under the bonds. In addition, Judge Stanceu found that sureties do not owe a duty of care to unknown third parties when issuing bonds and dismissed plaintiffs’ claim for negligent underwriting.
Simpson Thacher took the lead in drafting a motion to dismiss on behalf of the surety insurers. The Simpson team consisted of partners Mary Kay Vyskocil and Mike Garvey, associates Natalie Shimmel Drucker, Janelle Filson and Katie Burghardt, and paralegal Loretta Washienko.