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Note: The collective bargaining agreement between Capital Restoration & Painting Company (Employer) and Cement Masons Local 527 (Union) required Employer to make payments to a Union trust fund for benefits and dues. The agreement also provided for the payment of liquidated damages on delinquent contributions. Employer was also required to maintain a standby LC in favor of Union in the event of delinquent payments.

When Employer/Applicant failed to pay contributions in a timely manner, Union/Beneficiary drew on the standby to collect liquidated damages and was paid. Employer/Applicant demanded that the money drawn under the letter of credit be applied to its past due contributions rather than serving as liquidated damages. Employer/Applicant deducted this amount from its contributions. Union/Beneficiary sued Employer/Applicant for the amounts withheld. The United States District Court, Eastern District of Missouri, Hamilton, J., granted Union/Beneficiary's motion for summary judgment.

Union claimed that the standby was properly applied to the unpaid liquidated damages, maintaining that it was still entitled to contribution payments. Union/Beneficiary argued that "the letter of credit covered 'required payments to the ... fund' and the payment of liquidated damages is required by the collective bargaining agreement".

The terms of the LC as stated in the opinion provided:

WE [Issuing Bank] HEREBY ISSUE IN [Union/ Beneficiary's] FAVOR OUR IRREVOCABLE STANDBY LETTER OF CREDIT.... DATED SEPTEMBER 19, 2008 FOR THE ACCOUNT OF [Employer/Applicant].... UP TO THE AGGREGATE AMOUNT OF USD10, 000.00.... AVAILABLE BY:

3. BENEFICIARY'S STATEMENT PURPORTEDLY SIGNED BY ONE OF ITS OFFICIALS READING AS FOLLOWS:

"WE HEREBY CERTIFY THAT THE AMOUNT OF OUR DRAFT IS PURSUANT TO FAILURE IN ONE OR MORE OF THE FOLLOWING RESPECTS: (1) TO MAKE REQUIRED PENSION, WELFARE AND VACATION PAYMENTS AND/OR (2) TO PAY WAGES DUE, AND/OR (3) TO REMIT UNION DUES TO [Union/Beneficiary] AS PER THE COLLECTIVE BARGAINING AGREEMENT BY AND BETWEEN [Employer/Applicant] AND [Employer/ Applicant]."

[JEB]

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