Article

Note: To pay for a shipment of skim milk powder, Buyer, Inter Impex S.A.E., caused an LC in favor of Seller, Comtrade Corp. for US$309,750 to be issued. Seller arranged for Producers, Berkshire Dairy and Food Products, Inc. and Agri-Mark , Inc., to produce and arrange for shipment of the goods and to create the documents required by the LC. Seller also assigned the proceeds of the LC to the Producers.

Shipment was made in 7000 bags as per the packing list which was prepared by a forwarding agent employed by Producers. The packing list stated that the bags were "padded in the three-ply paper bags with polyliner of 25 kgs. Net each" and were produced by Agri-Mark. Although the opinion does not expressly so state, it appears that the LC was honored and that the proceeds were directed to Producers. Upon arrival, the shipment was found to be damaged.

Buyer filed suit against Seller and Producers, alleging breach of contract, breach of express and implied warranties, negligence, and fraudulent misrepresentation. Seller then asserted cross claims against Producers claiming indemnity for any liability. Agri-Mark moved to dismiss, arguing that it was not a party to Buyer's contract with Seller and the other Producer, and, so, is not liable for breach of contract, cannot be held liable for negligence or breach of express and implied warranties because only economic damages were alleged, and that neither Buyer nor Seller sufficiently pled a fraudulent misrepresentation claim. The US District Court for the Southern District of New York, Daniels, J., granted Agri-Mark's motion to dismiss.

The court dismissed the breach of contract claims by Buyer and Seller because they failed to allege that Agri-Mark was a party to either the agreement between Buyer and Seller or the LC. Instead, Buyer and Seller relied on Buyer's allegation that "the letter of credit was assigned to the [Producers] for the Shipment." The court, however, ruled that as neither Buyer nor Seller alleged an assignment agreement or that Seller had transferred its beneficiary status under the LC, there was no privity with Agri-Mark. The court further stated that "[a]lthough [Buyer] and [Seller] argue that Agri-Mark participated in the packaging and shipping of the skim milk powder, Seller's sole assertion that 'clearly, there exist[s] a contractual relationship between Seller and Agri- Mark,' is unsupported by any factual allegations." The court therefore dismissed the breach of contract claims.

The breach of express warranty claims were similarly dismissed because Buyer and Seller "failed to sufficiently allege that Agri-Mark was a party to either the purchased agreement or the letter of credit. Most importantly, their allegations also fail to show that Agri-Mark made any express warranties ... ." The breach of implied warranty claims were dismissed because Buyer and Seller alleged only economic loss which cannot be recovered under New York law absent privity of contract.

The court dismissed the claims for negligence in the packing and shipping of the goods because, under New York law, economic loss is not recoverable under a negligence theory. Finally, Buyer and Seller's claims of fraudulent misrepresentation were dismissed by the court for failing to state facts supporting their claims of reliance on representations by Agri-Mark about the packaging of the shipment and because Agri-Mark was not party to any of the Agreements or documents in which statements about the packaging were made.

[JEB/lhd]

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