Note: To provide assurance that a purchase of real property would close, Normandy Acquisitions LLC (Buyer/Applicant) obtained a letter of credit in favor of 915 Broadway Associates LLC (Seller/Beneficiary). Seller/Beneficiary alleged that the LC expired before being drawn and that Buyer/Applicant had breached the purchase contract. Because Buyer/Applicant was otherwise insolvent, Seller/Beneficiary and Buyer/Applicant reached a settlement to release each other from their respective monetary damages claims.

Seller/Beneficiary then sued its attorney for professional malpractice for failing to draw on the letter of credit or to advise Seller/Beneficiary to draw on the letter of credit prior to its expiration. The attorney sued Buyer/Applicant for contribution. Buyer/Applicant moved for summary judgment on the contribution claim.

The Supreme Court of New York, Frid, J., granted summary judgment in favor of Buyer/Applicant. The Judge reasoned that under New Jersey law, Buyer/Applicant was insulated from lawyer's claims for contribution because of the settlement agreement.


This decision serves as a useful cautionary tale for attorneys advising beneficiaries. While the opinion does not detail the conduct that resulted in malpractice, it appears that the buyer overlooked the explanation of the standby and that the applicant was insolvent.



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.