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Note: To facilitate the purchase of garments, JDE Associates, LLC (Applicant) applied for “various letters of credit” from Israel Discount Bank of New York (Issuer) in the total amount of USD 1,175,063.59 in favor of various suppliers located in Bangladesh (Beneficiaries). Navana Logistics Limited (Freight Forwarder) was hired by Beneficiaries to coordinate shipments from the port of Chittagong, Bangladesh to Los Angeles, California. TW Logistics, LLC (Applicant’s Delivery Agent) was responsible for ensuring that delivered goods were released to Applicant after Applicant tendered to Applicant’s Delivery Agent a bill of lading endorsed by both Issuer and Beneficiaries’ bank. Freight Forwarder coordinated the shipping of twenty-four containers from Beneficiaries to Applicant’s Delivery Agent, but Applicant rejected ten of the containers. The rejected containers contained USD 503,404.08 worth of goods. Applicant’s Delivery Agent allegedly released the other containers to Applicant without being presented the required bills of lading.

Freight Forwarder sued Issuer, Applicant, Applicant’s Delivery Agent, and the owner of Applicant’s Delivery Agent in New York for wrongful dishonor of the letters of credit, claiming that it was “[standing] in the shoes of the suppliers.” Beneficiaries had sued Freight Forwarder in a court in Bangladesh for payment on the shipped garments and also moved to intervene in this New York action. On motions by Issuer, Applicant’s Delivery Agent, and owner of Applicant’s Delivery Agent, the United States District Court for the Southern District of New York, Castel, J., granted motions to dismiss Freight Forwarder’s claims by Issuer, ruling that Freight Forwarder lacked standing to sue for wrongful dishonor of the letters of credit.

The Judge ruled that “[Freight Forwarder] does not plausibly allege that it has any claim in its own right against any of the four defendants.” The Judge further stated that “Beneficiaries of letters of credit may transfer their credit or assign their rights to proceeds from the letters of credit to another party, in which case the assignee or transferee becomes the only party entitled to the proceeds,” but noted that the Beneficiaries had not assigned or transferred any of their rights to letters of credit to Freight Forwarder. Moreover, the Judge noted that there was no allegation of a complying draw on the LC.

[CTR]

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