Note: In connection with the operation of water reclamation centers of the City of Atlanta (Beneficiary), Veolia Water North America Operating Services LLC (Applicant) posted a standby letter of credit. Under the parties' agreement, Beneficiary was permitted to draw the full amount of the standby provided it gave Applicant a notice of termination due to default. The agreement also required Beneficiary to repay Applicant any amount wrongfully drawn in addition to interest if a court determined that the drawing was not permitted.

In a contract dispute, Applicant defaulted after Beneficiary contended that Applicant failed to perform as required under their agreement. Beneficiary thereafter drew the full amount of the standby. Applicant sued Beneficiary for breach of contract, and the court awarded Applicant a net recovery of US$ 5,008,444.99. Beneficiary moved to amend the amount of damages awarded and attorney's fees. Applicant moved to amend the amount of damages and prejudgment interest. The U.S. District Court for the Northern District of Georgia, Atlanta Division, Thrash, J., granted in part and denied in part the Applicant's motion to alter clerk's judgment, directing the Clerk to enter an amended judgment in favor of Applicant in the amount of $10,001,991.58, and denied the Beneficiary's motion to alter judgment.

The Judge did not interpret indemnity clauses as permitting the recovery of attorney's fees in a suit between the parties and found that Beneficiary did not sufficiently justify deductions to the damages awarded to Applicant. The Judge further concluded that although Beneficiary had the right to draw on the letter of credit when it gave Applicant notice of termination, it did not have the right to keep the letter of credit proceeds interest-free.



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.