Note: In September 2007, Greenstar, LLC and Greenstar Allentown, LLC f/k/a Penn Acquisition Sub, LLC (Applicants) purchased a recycling enterprise in Northampton, Pennsylvania from Todd A. Heller and Todd Heller, Inc. (Beneficiaries) for US$58,750,000. Applicants paid US$11,410,000 of this amount through a promissory note supported by a standby letter of credit issued by Ulster Bank Ireland Limited (Issuer) in favor of Beneficiaries. The promissory note matured on 6 September 2010.

At the time of the purchase, Beneficiaries did not inform Applicants of a pending inquiry by the Pennsylvania Department of Environmental Protection regarding mixed broken glass at the Northampton facility, an apparent violation of their agreement.

Asserting that Beneficiaries violated the underlying contract and had committed fraud by failing to disclose the governmental inquiry at the time of sale, thereby committing material fraud, Applicants sued Beneficiaries seeking an injunction to block Beneficiaries from drawing on the standby. In September 2010, the court issued an order to maintain the status quo until ordered otherwise. Beneficiaries moved to dismiss all counts in Applicants' complaint. The United States District Court for the District of Delaware, Robinson J., granted Beneficiaries' motion to dismiss Applicants' complaint regarding the promissory note and the LC, but did not dismiss two other counts regarding breach of contract and fraud.

The Judge stated that a 2010 court order issued pursuant to a status quo agreement made by the parties already prohibited Beneficiaries from drawing on the LC. Therefore, the Judge concluded that there was no need for the court to provide for injunctive relief at that time. However, the court reserved authority to issue injunctive relief at a later time.



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.