Plaintiff commenced this action alleging in part that defendant's rejection of the drafts constituted an anticipatory repudiation of the entire letter of credit. Defendant moves to dismiss, or for partial summary judgment dismissing, this claim.
Since the parties submitted documents in support and in opposition to defendant's motion, I will treat defendant's motion as one for summary judgment. The standards applicable to motions for summary judgment are well-settled. A court may grant summary judgment only where there is no genuine issue of material fact and the moving party is therefore entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c). Accordingly, the court's task is not to "weigh the evidence and determine the truth of the matter but [to] determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby Inc., 477 U.S. 242, 249, 106 S. Ct. 2505, 2511, 91 L. Ed. 2d 202 (1986).
To succeed on a claim for anticipatory repudiation of a letter of credit, plaintiff must be able to show that: 1) defendant clearly demonstrated its intent not to continue with performance, and 2) plaintiff was ready, willing, and able to perform its obligations under the contract, i.e., the letter of credit.
See Decor by Nikkei International, Inc. v. Federal Republic of Nigeria, 497 F. Supp. 893, 906-07 (S.D.N.Y. 1980), aff'd, 647 F.2d 300 (2d Cir. 1981), cert. denied, 454 U.S. 1148, 102 S. Ct. 1012, 71 L. Ed. 2d 301 (1982); Ross Bicycles Inc. v. Citibank, N.A., 200 A.D.2d 379, 380, 606 N.Y.S.2d 192, 193 (1st Dep't 1994); see also John F. Dolan, The Law of Letters of Credit, P 9.02 at 9-7.
I do not need to analyze the first prong, however, since plaintiff, by its own admissions, cannot show the ability to perform its obligations under the letter of credit. The six drafts that were presented to defendant were discrepant and any additional drafts that would have been presented would have been similarly discrepant since the letter of credit had expired. While discrepant drafts are routinely honored, neither defendant nor Samsung was required to accept nonconforming drafts. See Alaska Textile Co., Inc. v. Chase Manhattan Bank, 982 F.2d 813, 816, 824 (2d Cir. 1992) (noting that while "the terms and conditions of a letter of credit must be strictly adhered to," "in the vast majority of cases, the account party waives the discrepancies and authorizes payment"). Hence, no genuine issue of fact exists as to the second prong of the test.
Plaintiff's argument that it need only show its ability to fulfill its obligations on the underlying contract is rejected. The only contract governing the relationship between the parties to this action is the letter of credit, and it would be incorrect to look to the underlying contract, entered into by different parties, in analyzing plaintiff's anticipatory repudiation claim. See Ross Bicycles, Inc. v. Citibank, N.A., 161 Misc. 2d 351, 613 N.Y.S.2d 538, 542 (Sup. Ct. N.Y. Co. 1994) ("the issuing bank's obligation to honor drafts drawn on a letter of credit by the beneficiary is separate and independent from any obligation of its customer to the beneficiary under the sale of goods contract").
It is undisputed that plaintiff could not, and cannot, meet the requirements of the letter of credit. Accordingly, defendant's motion to dismiss the anticipatory repudiation claim is granted.
Dated: New York, New York
February 27, 1995
United States District Judge