The opinion of the court was delivered by: GAGLIARDI
Plaintiffs United Technologies Corporation and United Technologies International, Inc. (hereinafter collectively "United") commenced this action in New York Supreme Court seeking to enjoin defendant Citibank, N.A. ("Citibank") from making payments on two letters of credit to defendant Iranians' Bank ("Iranians' "). The state court issued a temporary restraining order against Citibank's payment on March 5, 1979. Citibank removed the case to this court pursuant to 12 U.S.C. § 632 on the following day. This court subsequently extended the duration of the restraining order to permit the parties to brief the difficult issues raised by this case. United has moved for an order remanding the action to state court, or, in the alternative, for a preliminary injunction. For the reasons stated below, both motions are denied.
No evidentiary hearing has been held. The court's findings of fact are made on the basis of the affidavits submitted by United and Citibank. The two Iranian defendants have not yet been served.
The letters of credit which are the subject of this action were both issued in connection with certain contracts pursuant to which United agreed to sell $ 20 million worth of telephone cable to defendant Telecommunication Company of Iran ("TCI"). The contracts of sale required United, as seller, to procure from Iranians' performance bonds in an amount approximately equal to 10% Of the contract price. The contracts also provided for proportionate reductions of the amounts due under the performance bonds within two months of the delivery of each shipment of telephone cable. As an inducement to Iranians' to issue the performance bonds, United procured the issuance by Citibank of two irrevocable letters of credit in the original aggregate amount of $ 2,003,295 in favor of Iranians'. Letter of Credit No. CK-656061 was issued in the amount of $ 1,861,245, and letter of credit No. K-312190 was subsequently issued in the amount of $ 142,050. Iranians', in turn, issued the performance bonds to TCI required by the underlying contracts of sale.
United contends, and it is not disputed, that the contracts of sale have been fully performed on both sides, I. e., that United has delivered all of the cable ordered by TCI and that TCI has paid United the full purchase price of over $ 20 million. The last shipment under the contracts was allegedly made in August, 1978. TCI has apparently never claimed that there was any failure to perform on United's part. In May, 1977, TCI agreed to a reduction of the performance bonds and of letter of credit No. CK-650061 from $ 1,861,245 to $ 1,128,245. No further reduction in the performance bonds or in either of the letters of credit has ever been made, notwithstanding TCI's contractual commitment to reduce and ultimately discharge the bonds to reflect completion of the underlying contracts.
Under the terms of the letters of credit, Iranians' is entitled to draw against Citibank by notifying Citibank by cable either that:
"(A) YOU (Iranians') WERE REQUIRED TO DISBURSE THE AMOUNT UNDER YOUR UNDERTAKING OR (B) YOUR UNDERTAKING IS STILL OUTSTANDING AT EXPIRATION DATE OF OUR (Citibank's) LETTER OF CREDIT.
The letters of credit further provide that if Citibank is required to pay out any amount to Iranians' under the terms of the letters, Citibank is entitled to be reimbursed by United for that amount. With the consent of all parties the expiration of both letter of credit No. CK-650061 and Iranians' guarantee thereunder was extended to January 9, 1979. Letter of credit No. K-312190 was similarly extended by consent to February 24, 1979.
On December 23, 1978, Iranians' sent the following cable to Citibank with respect to letter of credit No. CK-650061:
OUR GUARANTEE IS ON CALL TO BE EXTENDED UP TO 9. JUNE, 1979 OR PAYMENT TO BE MADE IN FULL STOP PLEASE EITHER EXTEND YOUR COUNTER GUARANTEE/CREDIT IN OUR FAVOUR ACCORDINGLY OR CREDIT OUR ACCOUNT FOR THE TOTAL AMOUNT WITH YOURSELVES DLRS 1,128,245.
At United's request, Citibank responded to Iranians' that United had fulfilled its contractual obligations and that the performance bond upon which TCI was making its call should have been cancelled. The January 9, 1979 expiration date came and went. Apparently because of the civil disturbances in Iran, Citibank received no tested messages from Iranians' from December 27, 1978 through February 19, 1979. No further word came from Iranians' on letter of credit No. CK-650061 until February 27, 1979 when Citibank received the following telex dated the previous day:
RE YOUR TELEX JAN 5 . . PLEASE NOTE WE CANNOT CANCEL OUR GTEE PRIOR TO BENEFICIARIES APPROVAL AND SINCE THEY HAVE DEMANDED EITHER EXTENSION UNTIL 9. JUNE 1979 OR FULL PAYMENT THEREFORE TO HONOUR OUR UNDERTAKINGS WE CALL GTEE AMOUNT PLEASE CREDIT OUR ACCOUNT WITH YOURSELVES $ 1,128,245.
United again refused to extend the expiration date notwithstanding Citibank's warning that this cable could be construed as a demand for payment under the letter of credit.
As to letter of credit No. K-312190, scheduled to expire on February 24, 1979, Citibank received a cable from Iranians' in late February which read as follows:
OUR GUARANTEE IS ON CALL TO BE EXTENDED UP TO MAY 24, 1979 OR PAYMENT TO BE MADE IN FULL STOP PLEASE EITHER EXTEND YOUR CREDIT IN OUR FAVOUR ACCORDINGLY OR CREDIT OUR ACCOUNT WITH YOURSELVES DLRS 142,050.
Citibank contends that this cable was received on February 23; United argues that it was received on February 26. United has refused to agree to any further ...