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Note: To assure the delivery and warrant the performance of Mistsubishi gas turbine parts sold for USD 4,691,925, Turbo Dynamics Corporation (Seller/Applicant) obtained a performance bond from Deutsche Bank, AG’s Paris Branch (Seller’s Bank/Counter-Guarantor) for USD 469,192.50. Seller’s Bank/Counter-Guarantor issued a counter-guarantee in favor of Banque National d’Algerie (Local Bank) which issued its Local Guarantee in favor of Societe de Maintenance Equipments Industriels SPA (Buyer/Local Beneficiary), an Algerian company. The Seller/Applicant's CEO signed the application and a “Special Conditions” form, “incorporated by reference” in the application, which included a forum selection clause mandating that all disputes be heard in the Commercial Court in Paris, France and be subject to French law.

Following Seller/Applicant’s performance of the contract, Buyer/Local Beneficiary sent an undated letter to Seller/Applicant stating “[Seller/Applicant] has completed this order in a timely manner to our best satisfaction with high quality of service." Despite requests however, Buyer/Local Beneficiary did not authorize release of the guarantee.

When Seller’s Bank/Counter-Guarantor notified Seller/Applicant that Local Bank demanded payment of the remaining balance of USD 126,548.10 of the counter-guarantee,1 Seller/Applicant sued Seller’s Bank/Counter-Guarantor and Buyer/Local Beneficiary in New York and obtained a temporary restraining order ex parte enjoining any payments by Seller’s Bank/Counter-Guarantor. Subsequently, Seller/Applicant’s pretrial motion for a preliminary injunction was denied and the temporary restraining order was vacated. At trial, Seller/Applicant moved for default judgment against Buyer/Local Beneficiary, which had not appeared. Seller’s Bank/Counter-Guarantor moved for dismissal, which Seller/Applicant did not oppose. The New York Supreme Court, New York County, Moulton, J., granted Seller’s Bank/Counter-Guarantor’s unopposed motion for dismissal and dismissed Seller/Applicant’s motion for default judgment against Buyer/Local Beneficiary without prejudice.

The Judge noted that it was unclear whether the New York court had personal jurisdiction over Buyer/Local Beneficiary. Seller/Applicant’s allegations in its verified complaint that the goods were shipped from New York were insufficient to constitute “transacting business” under New York’s Long Arm Statute. Additionally, because Seller/Applicant’s allegation of service on Buyer/Local Beneficiary in “Algiers” was unaccompanied by a certificate required by the local statutes, personal service could not be established.

[MJK]

1
Although the opinion stated “[Seller/Applicant] was notified by [Seller’s Bank/Counter Guarantor] that [Local Bank] issued a call for payment to [Buyer/Local Beneficiary] of the balance of the guarantee,” this sentence does not make sense. Why would the Local Bank “issue a call” to the Local Beneficiary for payment?

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