Article

Note: Venture Industries Corp. (Beneficiary) moved for reconsideration of an earlier decision enjoining and effectively canceling an unspecified LC issued on behalf of Autoliv ASP, Inc. (Applicant) upon its payment of US$36,263,015.50 into a court-ordered account. The United States District Court for the Eastern District of Michigan, Southern Division, Cohn, J., denied Beneficiary's motion.

Beneficiary argued that the court "did not have the authority to enjoin [drawing] down [on] the letter of credit." Beneficiary analogized this case to the situation where a defendant posts a bond as security for an appeal and loses the appeal. In such a situation, the winning party would move the court to direct payment of the judgment using the bond, and the losing party would request that the court delay payment of the bond while the defendant seeks certiorari for its next appeal. In this hypothetical case, the court lacks jurisdiction to prevent payment using the bond although either an appellate court or the Supreme Court can honor the defendant's request. Beneficiary drew a comparison between an LC and a bond, arguing that since the court cannot prevent liquidating a bond for payment in the hypothetical situation, it should not be able to prevent drawing on an LC in this case.

The court dismissed Beneficiary's motion because it "completely ignores the fact that [Applicant] deposited the full amount of the jury verdict," and "with the deposit, the need for the letter of credit vanished."

[JEB/dep]

COPYRIGHT OF THE INSTITUTE OF INTERNATIONAL BANKING LAW & PRACTICE

The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of ICC or the other partners in DC-PRO.