Article

Type of Lawsuit: Beneficiary sued Applicant for fraud, conspiracy, and tortious interference with a contract for the purpose of avoiding honoring the LC.

Note: To pay for the purchase of 417,500 barrels of gasoline during a Venezuelan oil strike, Buyer/ Applicant, PDVSA Petroleos S.A., the Venezuelan state oil company, caused an LC to be issued in favor of Seller/Beneficiary, RZS Holdings, a Virginia proprietorship. The LC was confirmed by the German bank, Commerzbank, providing for presentation at its London counters. Beneficiary delivered the gasoline to the required port, but Applicant did not accept the gasoline and it was never discharged. According to Beneficiary, Applicant and its subsidiary attempted to renege on the contract when the need for imported gasoline was ameliorated at the end of the Venezuelan oil strike.

On presentation of documents, Confirmer dishonored for non-compliance of the documents. Beneficiary then sued Confirmer for wrongful dishonor (RZS Holdings v. Commerzbank, 279 F. Supp. 2d 716 (E.D.Va. 2003), abstracted at 2004 Annual Survey 324). When that suit was dismissed for lack of personal jurisdiction, Beneficiary brought the case at bar against Applicant/Buyer for fraud, conspiracy and tortious interference with contract. The suit was moved from the Circuit Court of the County of Fairfax to the U.S. District Court for the Commonwealth of Virginia where Applicant moved to dismiss on the ground that it was not subject to personal jurisdiction in Virginia.

In the U.S. District Court for the Eastern District of Virginia, Ellis, III, J. granted Applicant's motion to dismiss for lack of personal jurisdiction over Applicant/Buyer. The court noted that the relevant Virginia statute requires that personal jurisdiction be exercised to the greatest extent possible over entities which are "transacting business" in Virginia. The court also considered the constitutional provision of due process which allows the exercise of personal jurisdiction over an entity which "purposely direct[s] his activities at the residents of the forum." However, the court refused to find that Applicant/Buyer was "transacting business" in or "purposely direct[ing] his activities" toward Virginia simply because Applicant made phone calls and sent faxes in confirmation of a letter of credit, maintained a website which was not marketed toward, but was accessible from Virginia, and profited from a subsidiary's business in Virginia.

[JEB/llh]

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