Article

Prior History: First Union National Bank v. Paribas, 135 F.Supp. 443 (S.D.N.Y. 2001), abstracted at 2002 Annual Survey 240.

Note:Solo Industries Ltd., Applicant, which was located principally in the Middle East, obtained deferred payment LCs from Arab African International Bank and Emirates Bank International, Middle Eastern banks, in favor of Beneficiary who was located in the United Kingdom. Each of the letters authorized reimbursement by drawing dollars from Issuers' accounts at a New York City bank. First Union National Bank's London branch confirmed the LCs. After conforming documents had been presented, Confirmer discounted the payments due, relying on the obligation of the Issuer to pay the full amount owed when the letters matured.

In Spring 1999, Applicant became insolvent, leaving Issuer with a US$ 300 million loss. The documents presented by Beneficiary to Confirmer were fraudulent. Issuer contended that it was not liable because Confirmer knew of the fraudulent activity before discounting the letters.

After it learned that Issuers were anticipating legal proceedings, Confirmer filed instant complaint against Issuer in the US District Court for the Southern District of New York. Kaplan, J., dismissed the case on forum non conviniens. On appeal, the United States Court of Appeals for the Second Circuit, McLaughlin, Pooler, Parker, JJ., affirmed.

Confirmer argued that the trial court abused its discretion by failing to grant the full deference due to it by virtue of its U.S. Citizenship. The appellate court stated that "the deference given a plaintiff's choice of forum is not dispositive on a forum non conveniens motion ..., deference is only the first level of inquiry in a forum non conveniens inquiry." It noted that there was evidence that Confirmer's choice was motivated by "a change in English law unfavorable to our position" contained in Banco Santandar, S.A. v. Banque Paribas, 1 All E.R. (Comm.) 776 (2000). The appellate court also noted that the effect of Confirmer's choice was "diminished somewhat" because it was a corporation doing business abroad.

Noting the existence of an alternative forum in England, the appellate court turned to public and private interests factors, including access to sources of proof, availability of compulsory process for unwilling witnesses, and the cost of compelling witnesses to appear. Since most of the witnesses and document relevant to the case were in London or the Middle East, the appellate court ruled the trial court did not abuse its discretion in weighing private interests factors.

The public interest factors of interest to the appellate court were choice of law and whether there is a relationship between the chosen forum and the litigation. Although the trial court stated that there is "some likelihood" the court would apply English law to the case, it declined to make a definitive choice of law analysis because the litigation was at an early stage and it was not clear that there is a conflict between New York and English law. The trial court had determined that the litigation and related activity concerning the fraud is centered in London. The appellate court found that there was no abuse of discretion on the part of the District Court concluding "aside from the payment provision in the letters of credit and [Applicant's] U.S. citizenship, there are simply no contacts between this litigation and New York."

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