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May 12, 1999


The opinion of the court was delivered by: Motley, District Judge.


Each of the plaintiffs, Creaciones Con Idea, S.A. de C.V. (hereinafter, "Creaciones") and Imagen Textil y Confecciones, S.A. de C.V. (hereinafter, "Imagen"), was a beneficiary of an irrevocable letter of credit (hereinafter, "ILC") issued by defendant MashreqBank.*fn1 Under those ILCs, plaintiffs made payment demands that defendant rejected, asserting that plaintiffs provided inadequate documentation for those demands. Plaintiffs allege that defendant wrongfully refused the demands, in breach of the ILCs and with fraudulent intent. Defendant has moved to dismiss under Fed.R.Civ.P. 12(b)(6). The motion is granted in part and denied in part. Because the allegations are insufficient for a fraud or conspiracy claim, the motion is granted as against counts IV and V of the complaint. The motion is denied as to all other counts because of uncertainty as to whether defendant properly documented its refusals of plaintiffs' payment demands.


A. The Letters of Credit

At issue in this case are two ILCs issued by defendant MashreqBank upon the application of corporations that purchased clothing produced by plaintiffs. In a typical transaction covered by one of the ILCs, the purchaser would place an order from one of the plaintiff producers; the producer would ship the clothing to the purchaser and would submit (here, through another bank) to MashreqBank whatever documentation of the shipment the ILC required; and MashreqBank would pay the producer from the balance of the purchaser's credit under the ILC.

B. The Refused Demands for Payment

In August 1996 and September 1996, plaintiff Creaciones presented documentation for payment demands of $68,611.20 under ILC # 1.*fn2 See Compl. ¶ 15. In September 1996, plaintiff Imagen presented documentation for payments of $122,823.95 under ILC # 2. See id. ¶ 24. Defendant received three letters from Banamex demanding these payments, one for plaintiff Creaciones and two for plaintiff Banamex, each letter attached to the plaintiff's documentation. See Shaikh Aff., Ex. B (for Creaciones; hereinafter, "demand letter # 1"), Ex. G (for Imagen; hereinafter, "demand letter # 2"), Ex. J (for Imagen; hereinafter, "demand letter # 3").

Each Banamex demand letter noted multiple "discrepancies" between the plaintiff's documentation and the ILC's document requirements. Demand letter # 1 listed two specific omissions from bill of lading and unspecified "more discrepancies." Shaikh Aff., Ex. B; see also Tr. at 27. Demand letter # 2 listed three discrepancies: the NAFTA certificate was not an original but a copy; "shipment advice" was sent late; and the late shipment did not show notification to the purchaser. Shaikh Aff., Ex. G; see also Tr. at 27-28. Demand letter # 3 listed five discrepancies: failure to present the required sight draft; several omissions from the bill of lading; failure to specify the origin of the products in Mexico; omission of a signature from the packing list; and a discrepancy in the garment's certificate.*fn3 Shaikh Aff., Ex. J; see also Tr. at 28-29.

Defendant rejected each of the three demands in telexes stating that it had received "discrepant docs," had "informed the applicant accordingly," and was "holding the docs. entirely at y[ou]r disposal and risk. . . . If we do not receive any response from the applicant within 7 days from today, we shall return the docs. to you with our complete discharge." See Shaikh Aff., Ex. C, H, K (same quoted language regarding demand letters # 1, # 2, and # 3, respectively).

C. Plaintiffs' Complaint

On December 31, 1997, plaintiffs brought this action alleging that defendant's refusals of the payment demands amounted to breach of contract, fraud, and (only by MashreqBank and Platinum against Imagen under ILC # 2) conspiracy to commit this misconduct. The case arises under diversity jurisdiction because plaintiffs are foreign corporations organized under Mexican law and defendant is a registered commercial bank established under United Arab Emirates law. New York law applies because the transactions occurred in defendant's New York office.

In their complaint, plaintiffs claim that the discrepancies regarded mere "collateral matters" and therefore did not relieve defendant of its obligation to make the payments. See Pls.' Mem. at 16-18. Even if such discrepancies might relieve a bank of its obligation to pay a letter of credit beneficiary, plaintiffs argue, defendant is not relieved for several reasons here: defendant's refusal did not accord with governing UCP procedures for refusals based on document discrepancies, see id. at 3-9; plaintiffs' completed deliveries of the goods rendered any document discrepancies moot, see id. at 9-12; and defendant's practice of not objecting to such discrepancies precludes it from objecting here under principles ...

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