United States District Court, S.D. New York
OPINION AND ORDER
J. PAUL OETKEN, District Judge.
This is a case about letters of credit and a commercial transaction gone awry. Before the Court is a motion for summary judgment filed by Capital One, N.A. ("Capital One") on a counterclaim by Taiwan Industrial Glass Corporation ("Taiwan Glass") for wrongful dishonor of a letter of credit. For the reasons that follow, the motion is denied.
A. Factual Background
The following facts are taken from the parties' Local Civil Rule 56.1 statements and the submissions made in connection with the instant motion. They are undisputed unless otherwise indicated.
On August 29, 2008, CVD Equipment Corporation ("CVD") and Taiwan Glass entered into an agreement for CVD to produce specialized glass-treatment equipment for Taiwan Glass's assembly line ("Agreement"). In connection with the Agreement, Capital One issued a $3.5 million standby letter of credit ("Capital One l/c" or "the l/c") addressed to Taiwan Glass's bank, Mizuho Corporate Bank, Ltd. ("Mizuho"), which secured Taiwan Glass's ability to obtain a refund of its down payment to CVD in the event that CVD breached its obligations under the Agreement. Under the terms of the l/c, the earliest that Taiwan Glass could make a presentation for payment was after January 1, 2010. The l/c contained the following cancellation clause:
This letter of credit will be cancelled upon... copy of an original bill of lading submitted by CVD Equipment Corporation issued to the order of Taiwan Glass Ind. Corp.... dated not later than November 30, 2009 and indicating CVD Equipment Corporation as Shipper.
(Dkt. No. 133 ("Kurian Decl."), Ex. A at TG00143 (Dkt. No. 133) (emphasis added).) Mizuho also issued a letter of credit addressed to Capital One, which secured CVD's ability to secure payment in the event that Taiwan Glass breached the Agreement ("Mizuho l/c"). However, unlike the Capital One l/c, the Mizuho l/c expressly called for a "clean on board ocean bill of lading" dated no later than November 30, 2009. (Dkt. No. 138 ("Chen Decl."), Ex. 1 at CO00040.) In other words, it required a bill of lading indicating that the equipment was loaded on board the vessel on the date stamped.
On November 27, 2009, a trucking firm sent by EMO TRANS, Inc. ("EMO TRANS") picked up three containers of the CVD equipment from Long Island for delivery to a Staten Island port and shipment to Taiwan. EMO TRANS provided CVD with a bill of lading for the cargo dated November 27, 2009. (Chen Decl., Ex. 8 ("First B/L").) This bill of lading did not have an on board notation and, in actuality, two of the containers did not arrive at the Staten Island port until December 1, and all three were not loaded on the vessel for shipment until December 5.
In a letter dated December 2, CVD asked Capital One to cancel the Capital One l/c based upon the attached First B/L. On December 8, Capital One notified Mizuho that it had cancelled the l/c based upon the First B/L. Mizuho replied the next day, expressing its disagreement with cancellation because, inter alia, the bill of lading did not have an on board notation, and it had "checked with [the] shipping company and [had] evidence showing that the goods [were] not loaded on board before Nov 30, 2009 and the vessel departed Dec 06, 2009...." (Kurian Decl., Ex. E). Capital One responded the next day, asserting that under Article 20 of the ICC Uniform Customs and Practice for Documentary Credits ("UCP"), the bill of lading was ground for cancellation notwithstanding the absence of an on board notation, and, in accordance with UCP Article 5, its "determination [that the goods were timely shipped] was made based on the strength of the bill of lading presented and not on the disposition of the merchandise." ( Id., Ex. F.) Mizuho again stated its disagreement on December 14, contending that Article 20 required "evidence of the date the goods were shipped on board, " and reiterating that the carrier indicated the on board date to be December 5.
During November and early December, Karen Hamberg of CVD had been in contact with Kurian Kurian of Capital One to obtain advice regarding preparation of the bill of lading for CVD's shipment to Taiwan Glass, as well as other documents submitted to Mizuho in connection with the presentation for payment under the Mizuho l/c. Ms. Hamberg was also in contact with Anna Guzman of EMO TRANS because she believed that she needed an ocean bill of lading for the presentation of payment under the Mizuho l/c. ( See Chen Decl., Ex. 13.) On December 3, Ms. Guzman sent Ms. Hamberg an email with the ocean bill of lading attached, which indicated that the cargo had been received at the Staten Island port on December 1 and was expected to be "laden on board" on December 5. ( Id., Ex. 15 ("Ocean B/L").) The next day, Ms. Hamberg emailed Mr. Kurian, stating:
As per our conversation, I have edited the commercial invoice and attached it. Please confirm that the wording is as you requested.
As you stated, we will not include the copy of the ocean BOL received yesterday when I return the documents. I will send back the original two sets ...