Article

Note: Pursuant to a joint venture to operate a medical scanning facility in Saudi Arabia and purchase a CT scanner towards this end, Al Bandar International Group (Partner 1), arranged for issuance of an LC for US$1,000,000, naming Prometheus Health Imaging, Inc. (Partner 2) as beneficiary. The terms of the LC are not stated, but it appears that Applicant/Partner 1 had control over making the LC effective which was, in turn, linked to General Electric Medical Systems Europe (Manufacturer) providing documents necessary for shipment and import.

Beneficiary/Partner 2 had contracted with Manufacturer for purchase of the CT scanner. Payments were to be made in installments. After some delays, the CT scanner was shipped and documents provided to Partner 2 by Manufacturer. Partner 2 used the documents to obtain payment on the LC. However, it failed to use the LC proceeds to pay Manufacturer and, a week later, disaffirmed the purchase contract, claiming the Manufacturer had breached the contract by telling Partner 1 that it owned the scanner instead of Partner 2. Dr. Munir Uwaydah, Principal of Partner 2, also diverted all funds out of Partner 2's account for alternate, undisclosed purposes, rendering Partner 2 insolvent.

Manufacturer brought this action against Partner 2 and personally against Principal, and moved for summary judgment. The United States District Court for the Northern District of Ohio granted summary judgment in favor of Manufacturer on the fraud count. On appeal, the United States Court of Appeals for the Sixth Circuit, Siler, McKeague and Griffin, JJ., in a per curiam opinion, affirmed and dismissed the balance of the claims as moot.

The appellate court noted that the facts supported an inference that Principal "had no intention of paying for the scanner at any point. Such inference, while not the strongest, nonetheless went unrebutted by [Principal's] summary judgment submissions to the court below or in his brief to this court."

[JEB/hah]

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