Note: Ledwin E. Oviedo and LOIG, a Delaware limited liability company based in New York, (Buyer/Applicants) agreed to purchase US$500,000,000 worth of emeralds from Richard A. Campbell (Seller/Beneficiary) for a promise to pay $50,000,000 that was backed by an irrevocable standby letter of credit payable in 60 days. When Buyer/Applicants failed to pay for the emeralds, Seller/Beneficiary discovered that the documents used in the purchase were fraudulent, and that the standby was counterfeit. Seller/Beneficiary sued, alleging that the emerald transaction was part of a pattern of fraudulent activity engaged in by Buyer/Applicants under which counterfeit standbys were sent to California in connection with the purchase of a masterpiece painting and in connection with investment projects. Seller/Beneficiary brought action against Buyer/Applicants under the US Anti-Racketeering Statute (RICO), for common law fraud, and for conspiracy.

Buyer/Applicants moved to dismiss the case on the grounds of lack of personal jurisdiction, lack of venue, and under the doctrine of forum non conveniens.

The US District Court for the Southern District of California, Moskowitz, J., denied Buyer/Applicants' motion to dismiss for lack of personal jurisdiction, concluding that Buyer/Applicants' contacts with California residents satisfied the minimum contacts requirement for personal jurisdiction under the US Constitution. The Judge reasoned that the fraudulent transactions backed by counterfeit standbys were intentionally directed at California residents and caused harm to Seller/Beneficiaries that Buyer/Applicants knew would likely occur in the state. The Judge also denied Buyer/Applicants' motions to dismiss for lack of venue and to dismiss under the doctrine of forum non conveniens.

Comments: It is unclear from the court opinion if the emeralds in question were ever delivered to Buyer/Applicants. It is also unclear if the severe discrepancy between the payment value and the value of the emeralds is the product of a typo or is the result of a bizarre agreement between the Buyer/Applicants and the Seller/Beneficiary.



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.