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Note: Alkemal Singapore Private, Ltd. (Victim), a Singaporean company engaged in the international timber trade, purchased timber in Myanmar and was required to timely pay approximately USD 20,000,000 to the Myanmar Timber Enterprise, a government agency, to prevent confiscation of its timber. To facilitate payment of the fees, a third-party intermediary proposed that Victim engage DEW Global Finance, LLC (Escrow Agent), a Florida, USA company, whereby Escrow Agent would obtain for Victim, or introduce Victim to an investor to do so, a USD 20,000,000 “leased standby letter of credit” in exchange for Victim paying Escrow Agent a USD 2,600,000 service fee (Escrow Instructions). Victim and Escrow Agent communicated almost exclusively through the third-party intermediary and disputed which among several purported agreements was actually binding.

Ultimately, Victim wired USD 2,600,000 to Escrow Agent’s account; Victim, however, never received a standby, was not returned its USD 2.6 million service fee and, as a result, Victim’s timber was confiscated in Myanmar. Victim sued Escrow Agent for “breach of contract, breach of fiduciary duty, constructive fraud, fraud, negligent misrepresentation, civil conspiracy, conversion, unfair and deceptive trade practices…unjust enrichment, constructive trust, and an accounting.” After both parties’ motions for summary judgment were denied a bench trial was held. The Superior Court of North Carolina, Robinson, J., applying the law of North Carolina, granted judgment in favor of Victim on its breach of contract and conversion claims and dismissed all other claims.

Escrow Agent argued that it was not bound by the Escrow Instructions because Victim failed to produce a signed copy or show that Victim had sent an executed copy to Escrow Agent. Escrow Agent, however, had admitted to signing the Escrow Instructions in its answer to Victim’s complaint and the Judge previously denied leave for Escrow Agent to amend its answer. The Judge also noted that absent the admission by Escrow Agent, there was other evidence that Escrow Agent made an offer to Victim through an intermediary and that Victim’s “conduct, which occurred within thirty minutes of receiving the offer, in sending the initial wire transfer” and agreeing to forward a signed copy “adequately demonstrated” that Victim accepted Escrow Agent’s offer to be bound to the Escrow Instructions. The Judge concluded that “[Escrow Agent]…breached its obligation under the Escrow Instructions to ‘not make any disbursement of funds except as described [therein]’…because [Escrow Agent] released the funds to [third party] almost immediately after [Victim] transferred the funds without any documentation being provided to [Victim] with which [Victim] could verify the authenticity of the [standby]”.

The Judge also found in favor of Victim on its conversion claim stating that Escrow Agent failed to “(1) hold the funds until [Victim] had been given three banking days to verify the authenticity of the [standby], and (2) issue [Victim] a refund of the escrowed funds should the [standby] not issue”. The evidence showed that Victim retained its ownership rights in the USD 2.6 million service fee and because the record detailed Escrow Agent’s “bank account from which the funds originated, shows the exact amount of the funds, and shows [Escrow Agent]'s bank account to which the funds were transferred, the Court concludes that the funds are sufficiently identified so as to support a conversion claim against [Escrow Agent].”

The Judge dismissed all of Victim’s remaining claims with prejudice, primarily based on insufficient evidence. The Judge concluded that Victim failed to show that Escrow Agent owed Victim a fiduciary duty noting that the “hurried negotiations [were] conducted almost entirely through an intermediary”. Moreover, Victim failed to offer sufficient evidence to prove that Escrow Agent engaged in fraud despite the fact that other documents prepared by another party had been altered, purporting to show Victim’s signature. The Judge dismissed Victim’s claim for unjust enrichment on the basis that the claim was “precluded” as a result of the binding Escrow Instructions and the Judge’s determination on the breach of contract and conversion claims.

The Judge noted that Victim’s final “claims” for a constructive trust and an accounting were actually types of remedies. Because the Judge awarded Victim USD 2.6 million in compensatory damages for its breach of contract and conversion claims plus prejudgment interest, Victim received “an adequate remedy at law” and further equitable remedies would be “unnecessary and improper”.

[MJK]

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