The opinion of the court was delivered by: Motley, District Judge.
OPINION ON MOTION TO DISMISS
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'
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.
On Irrevocable Letter of Credit No. 76943-95 (hereinafter, "ILC
# 1"), opened on December 18, 1995, the applicant was Pacific
Coast Mills, Inc. (hereinafter, "Pacific") and the beneficiary
(after a valid transfer) was plaintiff Creaciones. See Shaikh
Aff. ¶ 6; id., Ex. A. On Irrevocable Letter of Credit No. 13943
"ILC # 2"), opened on July 17, 1996, the applicant was Platinum
Sportswear, Ltd. (hereinafter, "Platinum") and the beneficiary
was plaintiff Imagen. See id. ¶ 7; id., Ex. E. Both ILCs
state that they are governed by the Uniform Customs and Practice
for Documentary Credits (1993 revision), I.C.C. Pub. No. 500
(hereinafter, "UCP"), see Def.'s Mem., Ex. 1. Banco Nacional De
Mexico S.A. (hereinafter, "Banamex") served as the negotiating
bank, functioning as a go-between that submitted plaintiffs'
payment demands to defendant after plaintiffs made shipments.
See Shaikh Aff. ¶ 3.
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.
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 ...