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Note: To facilitate the sale of a cargo of urea, Radha International Corporation (Buyer/Applicant) applied for and obtained a USD 345,000 letter of credit issued by Soleil Chartered Bank (Issuer) in favor of Shandong Yuyuan Logistics Company, Inc. (Seller/Beneficiary). The letter of credit required presentation of a bill of lading, among other documents, although the opinion is silent on whether the LC was subject to any practice rules. After Seller/Beneficiary presented documents to Issuer, Issuer dishonored citing a discrepancy and stated that it was holding the documents “pending receipt of instructions for their disposal.” Following demands by Seller/Beneficiary for either payment or return of the documents, Issuer informed Seller/Beneficiary that Buyer/Applicant “did not have sufficient funds to cover the taxes, duties, and shipment costs due and owning, and that [Issuer] had paid [USD]45,000 on behalf of [Buyer/Applicant] and had taken ownership” of the goods.

Later, Issuer informed Seller/Beneficiary that it was storing the goods and attempting to sell the goods on Seller/Beneficiary’s behalf; Seller/Beneficiary alleged, however, that Issuer had already sold the cargo, paid Seller/Beneficiary USD 106,000, but otherwise “failed to provide an accounting or disclosure of the underlying sale or transactions, or the outstanding [USD]238,080” of the original cargo value. Subsequently, Seller/Beneficiary sued Issuer for breach of contract and unjust enrichment. Issuer prevailed on its first motion to dismiss based on a lack of subject matter jurisdiction as both parties were foreign entities as alleged in Seller/Beneficiary’s complaint defeating complete diversity. Seller/Beneficiary amended its complaint and Issuer again moved to dismiss the complaint for, among other reasons, lack of personal jurisdiction and forum non conveniens. The Supreme Court of New York, Borrok, J., denied Issuer’s motion.

The Judge began by citing several decisions1 to which Issuer was also a party showing that Issuer had previously “conceded personal jurisdiction and forum” and had withdrawn those arguments in the instant action.

The Judge then turned to Seller/Beneficiary’s amended complaint to determine whether it had adequately alleged plausible claims in order to defeat Issuer’s motion to dismiss. Regarding Seller/Beneficiary’s breach of contract claim, the Judge noted that Seller/Beneficiary was required to allege (i) the existence of a contract between the parties; (ii) Seller/Beneficiary’s performance; (iii) Issuer’s breach; and (iv) that such breach caused Seller/Beneficiary damages. Seller/Beneficiary argued that Issuer “breached the Letter of Credit” both by dishonoring its presentation of documents as well as having failed to return the documents and otherwise using them to take possession of the goods. Issuer argued that the documents contained a discrepancy. The Judge rejected Issuer’s argument and noted that “even if there were a discrepancy, the Amended Complaint states that [Seller/Beneficiary] notified the defendants that [Buyer/Applicant] accepted the discrepancy and requested that the transaction be completed in accordance with the Letter of Credit.” Moreover, the Judge noted that the amended complaint sufficiently alleged facts showing that Issuer’s parent company, Soleil Capitale Corporation (Parent) was an “alter-ego” of Issuer and thus Seller/Beneficiary could “pierce the corporate veil” to pursue its breach of contract claim against Issuer, Parent and the individual owner of both entities.

As for its unjust enrichment claim, Seller/Beneficiary’s amended complaint alleged that Issuer “wrongfully used the Sale Documents to obtain the urea and then sold it to a third party and retained the proceeds.” Although Issuer argued that the unjust enrichment claim ought to be dismissed as the dispute was governed by an express underlying contract, the Judge disagreed, noting that Seller/Beneficiary’s complaint adequately alleged the cause of action. Moreover, Issuer and Parent’s “alleged use of the Sale Documents to take possession of the urea and subsequent sale of the urea and retention of the profits constitute[d] a factually distinct cause of action for unjust enrichment separate and apart from the cause of action for breach of contract.”

[MJK]

1
See Kuliarchar Sea Foods (Cox's Bazar) Ltd. v. Soleil Chartered Bank, 168 A.D.3d 441 (N.Y. App. Div. 2019); Vanpoy Corp. v. Soliel Chartered Bank, No. 650406/17, 2019 WL 1059518 (N.Y. Sup. Ct. Feb. 21, 2019).

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