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Note: Proud Veterans, LLC ("Promoter"), a Kansas limited liability company, contracted with Global Energy Markets ("Buyer") to promote Buyer's grain sales to Iran. Promoter subsequently introduced Buyer to Traeger Resources and Logistics, Inc. ("Seller"), a grain supplier incorporated in New York. Seller subsequently contracted with Buyer to sell soybeans. In exchange, Buyer was required to provide a letter of credit equal to the sale price plus shipping costs.

Numerous addendums were added to the contract, the first of which required Buyer to pay an advance deposit. The second addendum required Buyer to provide Seller with a copy of a revised LC within three days "after receipt of the validated request for shipping company, shipping agreement, name of ship and proposed date and location for loading the ship."

Seller had informed Promoter that it owned enough soybeans to complete the contract and that the soybeans were in storage in Alexandria, Egypt, ready for delivery. After investigating, Promoter did not find a storage facility in Alexandria capable of storing the amount of soybeans in the contract. Nor did Seller produce documentation showing the existence of soybeans required by the contract. Additionally, Buyer never received any information pertaining to the shipping agreement and thus never obtained a revised LC. Upon the expiration of Buyer's original LC, Promoter requested reimbursement of the advance funds that were deposited in another defendant's bank account. Subsequently, Promoter, Buyer and Seller entered into an agreement to resolve outstanding claims, but Seller asserted that "sufficient funds to pay the amounts due under the settlement agreement were on deposit in a [Seller's] bank account in Hong Kong, but that the Chinese government and Chinese banking authorities were preventing [Seller's] withdrawal of the funds so it could pay the balance due under the settlement agreement."

Promoter then sued Seller and other third parties in Kansas, USA for conspiracy to defraud, breach of contract, breach of fiduciary duty and sought to pierce the corporate veil. In response, Seller filed a motion to dismiss, alleging a lack of personal jurisdiction and failure to state a claim. The U.S. District Court for the District of Kansas, Robinson, J., granted Seller's motion to dismiss for lack of personal jurisdiction, but noted that Promoter's claim stated a cause of action.

The Judge noted that a "plaintiff must show that jurisdiction is proper under the laws of the forum state and that the exercise of jurisdiction would not offend due process". As such, the Judge ruled that jurisdiction fails under the due process analysis "because subjecting Defendants to jurisdiction in the forum state would offend traditional notions of fair play and substantial justice." The Judge noted that Sellers reside in New York and Canada, and had not established "minimum contacts in Kansas.

[ABS/mjb]

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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.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.