Article

Note: At the request of Republic Steel (Buyer/Applicant), a steel producer, HSBC USA, N.A. (Issuer) issued a letter of credit that, as amended, was for USD 10,000,000 in favor of ProTrade Steel Co., Ltd. (Seller/Beneficiary) to assure payment for the purchase of scrap metal. The LC required Seller/Beneficiary to present the original LC, “a copy of an unpaid commercial invoice,” and a signed statement by a representative stating Buyer/Applicant’s invoice was presented, unpaid, and that payment was ten days past due.

Following Buyer/Applicant’s cancellation of several orders, Seller/Beneficiary sent Buyer/Applicant a commercial invoice for resulting market losses. Claiming that it could cancel orders pursuant to agreed terms and conditions, Buyer/Applicant refused to pay, and Seller/Beneficiary drew on the LC which was honored by Issuer.

Buyer/Applicant then sued Seller/Beneficiary and Issuer for wrongful honor and civil conspiracy. When Issuer moved to dismiss Buyer/Applicant’s suit for failure to state a claim, the trial court granted Issuer’s motion, dismissing the claims against Issuer. Thereafter, Buyer/Applicant and Seller/Beneficiary agreed that the remaining issues, namely, whether Buyer/Applicant had the right to cancel overdue purchase orders and whether the due dates in the purchase orders had been modified or waived, would be tried before a magistrate and jury. The jury returned a verdict in favor of Buyer/Applicant and the magistrate filed a recommendation for the trial court to enter judgment reflecting the same. Subsequently, Seller/Beneficiary filed several procedural and evidentiary objections regarding the magistrate’s decision which the trial court overruled. Seller/Beneficiary appealed the final trial judgment. The Court of Appeals of Ohio, Gwin, Hoffman and Wise, JJ., affirmed.

On appeal, each assignment of error was reviewed for abuse of discretion. Thus, a trial court decision could be reversed if the appellate court “determine[d] [that] the trial court’s decision was unreasonable, arbitrary or unconscionable and not merely an error of law or judgment.” Several assignments of error regarded testimony by Buyer/Applicant’s scrap industry expert whose deposition was played for the jury as the expert was unavailable for trial. While Seller/Beneficiary argued it was materially prejudiced by the exclusion of part of the deposition, the appellate court disagreed stating that Seller/Beneficiary “mischaracterize[d]” the excluded testimony because the expert “testified only that he ha[d] not seen an invoice for market losses”, and not that entities never sue for market losses. Furthermore, certain testimony involved standard practice in international transactions and not that of the “domestic steel industry”, and was thus properly excluded. The appellate court rejected Seller/Beneficiary’s final assignment of error regarding evidence of course of dealing because the excluded testimony “had nothing to do” with the relevant contracts nor with Seller/Beneficiary’s defense.

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