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Note: To facilitate an international sale of fish, Soleil Chartered Bank (Issuer) issued a standby letter of credit in favor of Vanpoy Corporation S.R.L. (Beneficiary), a Costa Rican company. The Opinion is silent as to Applicant identity, standby value and whether the standby was subject to any practice rules.

After Beneficiary made demands for payment, which Issuer dishonored, Issuer apparently made a partial payment to Beneficiary. Beneficiary, however, subsequently sued Issuer and its parent company, Soleil Capital Corporation (SCC) for breach of contract, unjust enrichment and negligent misrepresentation. Issuer and SCC moved to dismiss the complaint for lack of jurisdiction and for failure to state claims. The Supreme Court of New York, Bannon, J., dismissed the complaint in full against SCC and dismissed the unjust enrichment and negligent misrepresentation claims against Issuer.

The main issue was whether Beneficiary’s complaint alleged sufficient facts to support the New York state court exercising general jurisdiction over Issuer. The complaint alleged that Issuer conducted business from a New York address, that the standby was issued from that address and included SWIFT correspondences between Beneficiary and Issuer indicating the same. Issuer, in opposition, submitted affirmations which the Judge noted were “remarkable for what they do not address”, namely identifying the location of Issuer’s principal place of business and to what degree of Issuer’s overall business was New York based. On the issue of jurisdiction over Issuer, the Judge concluded that Beneficiary “ha[d] sufficiently demonstrated New York contacts and that facts may exist to exercise personal jurisdiction over [Issuer] to entitle it to conduct discovery”. Moreover, the Judge noted that the complaint was based on “the application, issuance and payment of the [standby]”, and not the underlying transaction, citing case law discussing the independence principle of letters of credit.

The Judge also rejected Issuer’s argument that New York was not a convenient forum for the dispute. While the underlying transaction was international, Issuer failed to “address why [Issuer], which has an office in New York and, apparently, issued the [standby] from that office, and corresponded from and met with [Beneficiary] there, would not be able to produce the documents presented by [Beneficiary] to draw on the [standby].” Furthermore, Issuer offered no evidence to support its position that witnesses could not be called in New York or why the dispute should be governed by foreign law.

Finding that Beneficiary offered sufficient facts to support jurisdiction over Issuer, the Judge dismissed the complaint against SCC because the “complaint is devoid of allegations of SCC’s use of domination and control over [Issuer]” necessary to support a corporate veil-piercing theory. The Judge also dismissed the claims of negligent misrepresentation and unjust enrichment against Issuer because the claims were “duplicative of the contract claim.”

[MJK]

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The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of the ICC or Coastline Solutions.