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December 3, 1984


The opinion of the court was delivered by: KRAM



 The above-captioned action is before this Court upon plaintiff's motion for a preliminary injunction enjoining defendant from calling a certain Letter of Guarantee for payment and upon defendant's motion to stay these proceedings pending arbitration. For the reasons stated below, both motions are granted.


 Rogers, Burgun, Shahine & Deschler, Inc. ("RBSD") is a New York corporation engaged in business as architectural designers of hospitals.

 Dongsan Construction Company, Ltd. ("Dongsan") is a Korean corporation, with offices in New Jersey, engaged in business as general contractors in construction projects.

 In 1982, Saudi Arabia undertook to build a hospital in Jubail. Dongsan secured the main contract on this project.Dongsan subcontracted a portion of the architectural and engineering design work on the project to RBSD (the "Subcontract").

 Under the Subcontract, RBSD agreed to perform certain services, some of which RBSD, in turn, subcontracted to other entities. In return for those services, Dongsan agreed to pay RBSD some $2,596,086. Dongsan further agreed to pay RBSD twenty per cent of that amount ($519,217) in advance of RBSD's performance. In order to secure this advance payment, RBSD provided Dongsan a Letter of Guarantee from Bank Al-Jazira in the full amount of the advance payment. The amount guaranteed by this letter was to decrease periodically commensurate with the percentage of work performed by RBSD and paid for by Dongsan.

 The Subcontract also provided in broad terms for resolution of disputes by arbitration in Paris, France, under the rules of Conciliation and Arbitration of the International Chamber of Commerce. *fn1"

 RBSD has performed some of the services required by the Subcontract and Dongsan has paid RBSD for that work. Pursuant to the terms of the Letter of Guarantee, the amount currently secured is $155,766. There have been occasional disputes during the course of RBSD's performance regarding changed specifications, new demands, and delays in performance. These disputes, for the most part, were resolved amicably by the parties and a modification of the Subcontract agreed to on August 22, 1984. The modification essentially established a firm, detailed schedule for the completion of performance under the Subcontract. The modification also provides that "[e]xcept as expressly provided herein, both parties reserve all rights under the Subcontract and the Subcontract remains unmodified and in full force and effect." The modification in no way alters the dispute resolution mechanism set out in Article XVI of the Subcontract.

 pThereafter, a dispute arose with respect to RBSD's performance in accordance with the schedule set forth in the August 1984 modification. RBSD claims that the dispute concerns a very small portion of the work performed or owing. On September 16, 1984, Dongsan notified RBSD that it intended to complete certain of RBSD's obligations itself, effecting a partial termination of the Subcontract as modified. Additionally, Dongsan indicated that it would withhold the remaining balance due RBSD under the Subcontract to set-off the anticipated expenses in completing those parts of RBSD's services it had terminated.

 RBSD claims that it has substantially performed all of its obligations due to date, that it is owed some $752,865 for actual and tendered performance, and that it is entitled to the release of the remaining $155,766 held by way of the Letter of Guarantee as security.

 RBSD filed the complaint herein on November 5, 1984, alleging breach of contract by Dongsan and seeking inter alia the $908,631 allegedly owed RBSD by Dongsan and a preliminary injunction enjoining Dongsan from calling the Letter of Guarantee. By Order to Show Cause dated November 5, 1984, RBSD moved this Court for the preliminary injunction, pursuant to Fed. R. Civ. P. 65. The Court thereby also entered a temporary restraining order against Dongsan enjoining it from calling the Letter of Guarantee. At the request of, and with the consent of, Dongsan, the hearing scheduled on that motion was adjourned from November 13 to November 21, 1984, and the temporary restraining order continued for the period.

 On November 21, 1984, Dongsan filed its motion to dismiss or stay this action pending arbitration of the disputes herein. ...

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