Article

Topics: Personal jurisdiction, Confirmer

Note: Mago International LLC ("Seller"), a New York trading company, agreed to sell frozen chicken and other food products to N.T.P Genita ("Buyer"), a company from Kosovo. The contract called for Buyer to provide a confirmed standby letter of credit to guarantee payment. The standby was issued by Bank of Business ("Issuer"), located in Kosovo, and confirmed by LHB AG ("Confirmer"), a German bank organized under German law that does not solicit any business in New York. Wells Fargo ("Advising Bank") was to operate as Seller's advising bank.

Describing the confirmation, the court noted that Seller "[could] only seek payment from [Confirmer]". The standby LC, governed by UCP600, required Seller's to present proof of Buyer's non-payment together with all other required documents to Confirmer through Advising Bank. A New York branch of the Advising Bank held Seller's sole bank account.

When Buyer failed to pay, Seller/Beneficiary presented documents to Advising Bank in New York in four successive requests for payment which forwarded them to Confirmer through Advising Bank's corporate offices in San Francisco. Each request listed Seller's address in New York and its bank account number. However, while each request stated that Advising Bank held the bank account, there was no indication of where the branch was located. Confirmer denied the first three requests for payment because they were deficient, but denied the fourth because the standby LC had expired.

Seller subsequently sued Confirmer for wrongful dishonor in New York after the denial of the fourth request for payment. Confirmer moved to dismiss for lack of personal jurisdiction or, in the alternative, forum non conveniens. The U.S. District Court for the Southern District of New York, McMahon, J., denied the motion.

Confirmer argued that the payment was to be made to a bank account held by Advising Bank, and that since the Advising Bank was headquartered in San Francisco, it had agreed payment was to be made in California. Under the New York long-arm statute (N.Y.C.P.L.R § 302), New York courts may exercise personal jurisdiction over non-domiciliaries that "(1) 'transacts any business within the state'; or (2) 'contracts anywhere to supply goods or services in the state.'" Applying this statute, the Judge rejected Confirmer's argument because the bank had "a contractual obligation to pay [Seller]---not [Advising Bank]---and [Seller] is a New York corporation with its offices in New York." The Judge also stated that no argument was put forward that exercising jurisdiction was unreasonable.

With respect to the alternative of forum non conveniens, Confirmer argued that Seller's deference as to choice of forum should be reduced and that Germany offered an adequate forum for the litigation. The Judge ruled dismissal due to forum non conveniens was unwarranted because, while Germany did offer an adequate forum, Seller had obtained a standby LC precisely to reduce the need to litigate and because "the private and public interest factors do not outweigh substantial deference given to [Seller's] choice of its home forum".

[ABS/mjb]

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