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Note: TransAsia Commodities Ltd. (Buyer/ Applicant) contracted with NewLead JMEG (Seller/ Beneficiary) to buy 110,000 metric tons of high sulfur coal for USD 8,250,000, based on an analysis of coal samples by a reputable assayer of coal.

The contracted specified that Seller/Beneficiary was to deliver the coal to New Orleans and that any disputes would be resolved by the courts of the State of New York. Buyer/Applicant had a purchaser for the coal in India and arranged to transport the coal from New Orleans to India. Buyer/Applicant then obtained an LC for the full amount from NBAD Private Bank SA (Issuer).

Two days prior to the vessel's arrival in New Orleans, Seller/Beneficiary informed Buyer/ Applicant that issues had arisen and that a USD 1,000,000 prepayment would be required. Buyer/ Applicant refused the prepayment and notified Seller/ Beneficiary that the vessel was ready to receive the coal. When the vessel arrived, Buyer/Applicant discovered that no coal had been shipped to New Orleans. Seller/Beneficiary assured Buyer/Applicant that the coal had been shipped but under a different name; Seller/Beneficiary then made another demand for the prepayment. Buyer/Applicant demanded more information on the coal and sent several more inquires, and Seller/Beneficiary kept promising that the coal was in New Orleans.

Finally, Buyer/Applicant "requested its letter of credit be cancelled" and Beneficiary notified Buyer/ Applicant "that the letter of credit was cancelled". The Buyer/Applicant further notified the vessel and the Indian buyer that the coal would not be available and was forced to pay non-performance damages to both the buyer and the vessel. Buyer/Applicant accused Seller/Beneficiary of knowing that it could not fulfill the duties of the contract and had entered into the contract with the intention of inflating its stock price on the NASDAQ exchange.

Buyer/Applicant sued Seller/Beneficiary and the sole owner of Seller/Beneficiary personally in the Supreme Court of New York, New York County for USD 6,200,000, alleging breach of contract, common law fraud and fraudulent inducement. Seller/Beneficiary moved to dismiss the suit for lack of personal jurisdiction and for failure to state the alter-ego claims.

The Supreme Court of New York, New County, Ramos, J., denied Seller/Beneficiary's motion to dismiss on both personal jurisdictional and alter-ego grounds.

The court noted, "[i]n general, New York courts may obtain personal jurisdiction over a party based on (1) consent to jurisdiction in New York...." It further stated, "A plaintiff claiming alter-ego liability over a defendant is required to allege: 1) complete domination of the corporation with respect to the transaction attacked, and 2) that such domination was used to commit a fraud or wrong against the plaintiff which resulted in plaintiff's injury."

Comment: One wonders how the LC was cancelled.

[JAH]

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