United States District Court, S.D. New York
GREAT WALL DE VENEZUELA C.A., Plaintiff--Counterclaim Defendant,
INTERAUDI BANK, Defendant--Counterclaimant--Third-Party Plaintiff,
v. ICA INTERNATIONAL AUTOMOBILES LIMITED, et al., Third-Party Defendants
[Copyrighted Material Omitted]
For Great Wall De Venezuela C.A., Plaintiff: Ana-Claudia Roderick, Beth Erin Nagalski, Jeffrey T. Golenbock, Golenbock Eiseman Assor Bell & Peskoe LLP, New York, NY.
For Interaudi Bank, Defendant: Steven Glen Mintz, LEAD ATTORNEY, Kevin Michael Brown, Mintz & Gold LLP, NYC, NY.
For ICA International Automobiles Limited, Antonio Yammine, Mohsen Yammine, ThirdParty Defendants: Barry R Fischer, The Barry Fischer Law Firm L.L.C., New York, NY.
For Interaudi Bank, Counter Claimant: Steven Glen Mintz, LEAD ATTORNEY, Kevin Michael Brown, Mintz & Gold LLP, NYC, NY.
For ICA International Automobiles Limited, Antonio Yammine, Counter Defendants: Barry R Fischer, The Barry Fischer Law Firm L.L.C., New York, NY.
For Great Wall De Venezuela C.A., Counter Defendant: Ana-Claudia Roderick, Beth Erin Nagalski, Jeffrey T. Golenbock, Golenbock Eiseman Assor Bell & Peskoe LLP, New York, NY.
OPINION AND ORDER
J. PAUL OETKEN, United States District Judge.
This action, which concerns a dispute arising from the sale of an automobile manufacturing plant in Venezuela, raises the issue of the interaction between the standard for granting interpleader relief in this circuit and the law governing letters of credit.
Plaintiff Great Wall de Venezuela C.A. (" Great Wall" ), the seller of the automobile plant, sues to collect approximately $11 million that it alleges it is owed by Defendant Interaudi Bank (" Interaudi" ) pursuant to a letter of credit that Interaudi issued on behalf of the buyers of the plant, Third-Party Defendants ICA International Automobile Limited (" ICA" ), and ICA's two principals, brothers Antonio and Mohsen Yammine (" the Yammines" ) (collectively, " the ICA Defendants" ). In turn, Interaudi counterclaims against Great Wall and the ICA Defendants for interpleader relief. It asserts that it is subject to competing claims for the $11 million from Great Wall and the ICA Defendants, and asks the Court to take possession of the disputed funds, release Interaudi from this action, and adjudicate the underlying dispute between Great Wall and the ICA Defendants to determine the rightful owner of the funds.
Now before the Court are three motions. First, Great Wall moves for partial summary judgment on its claims against Interaudi, and for summary judgment dismissing Interaudi's counterclaim for interpleader relief. Second, Interaudi moves for summary judgment on its counterclaim for interpleader relief, and for judgment on the pleadings dismissing Great Wall's claims. Finally, the ICA Defendants request, should the Court grant Interaudi's motion for interpleader relief, to stay the case and to compel arbitration of the underlying dispute between ICA and Great Wall in Venezuela.
The Court heard oral argument on June 8, 2015.
For the reasons that follow, the Court concludes that interpleader relief is not appropriate given the facts of this case. Accordingly, the Court grants summary judgment dismissing Interaudi's counterclaim for interpleader relief, and denies as moot the ICA Defendants' motion to stay the case and compel arbitration. As for Great Wall's claims against Interaudi, Great Wall's motion for partial summary judgment on those claims is denied, and Interaudi's motion for judgment on the pleadings on those claims is granted with respect to the civil theft claim and denied with respect to all other claims.
I. Factual Background
The facts are not in dispute unless otherwise noted. Prior to July 2013, Franklin Hoet Linares (" Hoet" ) and Cesar
Hirsch Diz (" Hirsch" ) were the owners of a Venezuelan entity known as Ensamblaje Superior, C.A., or " ESCA." (Dkt. No. 48 (" Great Wall Counter 56.1" ) ¶ 5.) ESCA owned an automobile manufacturing plant (" the Plant" ) located in the town of Guacara, in Carabobo State, Venezuela. ( Id. ¶ 6.) Hoet and Hirsch are also principals of Great Wall, which owned the Plant's equipment and machinery prior to July 2013. ( Id. ¶ ¶ 7-8.) Also prior to July 2013, a company owned by the Yammines called Corporacion Automotriz ZGT C.A. leased the Plant and paid rent to Great Wall. (Dkt. No. 53 (" Yammine Decl." ) ¶ 6.)
On June 4, 2013, the Yammines entered into an option contract (the " Option Contract" ) with Hoet and Hirsch, which gave the Yammines and ICA the option of purchasing the Plant, along with its equipment and machinery, from ESCA and Great Wall, respectively. (Dkt. No. 46 (" Great Wall 56.1" ) ¶ 1; Dkt. No. 70 (" ICA Counter 56.1" ) ¶ 1; Yammine Decl. ¶ ¶ 3-4; Dkt. No. 54 (" Yammine Aff." ), Exs. A-B (" Option Contract" ).) The Option Contract made various representations, including that ESCA and Great Wall were " the legal owner[s] and ha[ve] the absolute and unrestricted right, interest and title on the assets [in question], which are free of any encumbrance, . . . expropriation order[,] or notice of expropriation intent issued by any national or local government or any governmental body" (Option Contract, Clauses 8.1.7, 8.2.7), and that " [t]he statements made and the information provided by [Hoet and Hirsch] regarding the transactions provided in this Agreement are true and accurate in all substantial aspects, [and] no relevant fact has been concealed from [the Yammines]" ( id. Clause 8.1.11).
Approximately one month later, on July 3, 2013, the parties to the Option Contract entered into a second contract (the " Contract" ), pursuant to which the Yammines and ICA acquired (1) the Plant by acquiring 100% of the outstanding shares of ESCA; and (2) the equipment and machinery through an asset sale by Great Wall. (Yammine Decl. ¶ 16; Yammine Aff. Exs. C-D (" Contract" ).) Under the terms of the Contract, the Yammines and ICA were to pay Great Wall an aggregate of $16 million as consideration for these assets. (Contract Clause 2.) At the Contract's closing, the Yammines had already paid Great Wall $5 million. (Contract Clause 2.1; Great Wall 56.1 ¶ 5.) The remaining $11 million was to be guaranteed by a letter of credit. (Contract Clause 2.2; Great Wall 56.1 ¶ 5; ICA Counter 56.1 ¶ 5.)
On July 3, 2013, Mohsen Yammine submitted an application to Interaudi for a letter of credit, on behalf of ICA. (Yammine Aff. ¶ 22; Dkt. No. 37 (" Interaudi 56.1" ) ¶ 15; Dkt. No. 36 (" Audi Decl." ), Ex. A (" Application" ).) The application sought issuance of a letter of credit in the amount of $11,315,000 " to facilitate the payment for the purchase of an automobile assembly plant in Guacara, Estado Carabobo, Venezuela." (Application at 1.) The application specified that payments were to be made to Great Wall, upon Great Wall's presentation of a proper demand, in three installments: (1) $4,498,333.33 on December 17, 2013; (2) $3,433,333.33 on Jun 17, 2013; and (3) $3,383,333.34 on December 17, 2014. ( Id. )
Interaudi approved the application on July 5, 2013, and issued letter of credit IMP-009/13 (the " Letter of Credit" ) that same day, with ICA as the applicant and Great Wall as the beneficiary, and with the same payment schedule as that requested in the application. (Interaudi 56.1 ¶ 20; Audi Decl. Ex. B (" Letter of Credit" ).) The Letter of Credit states that it is
available against presentation of beneficiary's draft at 180 Days Date, drawn on Interaudi Bank, New York bearing the clause: " Drawn under Documentary Letter of Credit No. IMP-009/13[" ] [and] accompanied by the following document:
Beneficiary's Written Statement purportedly signed by an officer of Great Wall de Venezuela C.A. stating " We hereby certify that Installment No. is due in accordance with the contract dated for the purpose of purchasing shares and assembly plant, Automoviles Great Wall in Venezuela."
(Letter of Credit.) The Letter of Credit further states that its " Place of Issue" is New York, New York, and that " [e]xcept so far as otherwise expressly stated[,] this [Letter of Credit] is subject to the 'Uniform Customs and Practice for Documentary Credits' (2007 Revision) fixed by the International Chamber of Commerce (Publication No. 600)." ( Id. ) At some point--it is not entirely clear when--the ICA Defendants paid Interaudi $11 million in consideration for Interaudi's obligation to Great Wall under the Letter of Credit. (Dkt. No. 71, Transcript of proceedings on June 8, 2015 (" Trans." ), at 3:7-23.)
On July 30, 2013, the Venezuelan government issued Presidential Decree No. 269 (the " Decree" ). ( See Dkt. No. 44 (" Golenbock Decl." ) Ex. 6 (" Decree" ).) The parties dispute the proper translation and legal effect of the Decree. ( See Dkt. No. 60 (" Interaudi Counter 56.1" ) ¶ 18 (" [T]he translation obtained by Interaudi differs in numerous material aspects from the translation obtained by [Great Wall]." ).) Interaudi and the ICA Defendants argue that the decree ordered the immediate acquisition of Great Wall's property--including the Plant--for the purposes of expanding the operating capacity of the Venezuelan automotive sector. (Interaudi 56.1 ¶ ¶ 23-25; Yammine Aff. ¶ 26.) Great Wall insists that the Decree announced only the Venezuelan Government's " future intent" to expropriate the Plant and its equipment. (Great Wall 56.1 ¶ 18; Great Wall Counter 56.1 ¶ ¶ 23-25; see also Dkt. No. 45 (" Brewer-Carias Decl." ) ¶ ¶ 15-16.)
On August 2, 2013, less than a week after the Decree was issued, Hoet visited the office of Interaudi in Miami, Florida, to discuss discounting the Letter of Credit to the sum of $11,007,158.34, which was approximately 97% of the Letter's face value,
apparently in exchange for a single, immediate payment, instead of the three payments over a series of months that were contemplated in the Letter of Credit. (Great Wall Counter 56.1 ¶ 26; Interaudi Counter 56.1 ¶ 19; Yammine Aff. ¶ ¶ 27-34.) The parties dispute whether the discounting transaction was ever completed, but agree that, completed or not completed, Interaudi deposited the discounted sum into one of Great Wall's accounts at Interaudi that same day. (Interaudi Counter 56.1 ¶ 20; Yammine Decl. ¶ 35.)
Five days after Interaudi deposited the discounted funds into Great Wall's account, the Yammines notified Interaudi of the Decree. (Yammine Decl. ¶ 36; Audi Decl. Ex. C (" Aug. 7 Yammine Letter" ).) In their letter, the Yammines stated that they believed that Great Wall, Hirsch, and Hoet had " breached certain representations and warranties set forth in the contract for the purpose of purchasing shares and assembly plant [ sic ] . . . which was submitted to Interaudi in connection with its issuing the [Letter of Credit]." (Aug. 7 Yammine Letter at 1.) " As such," the Yammines wrote, " you are hereby notified that any Written Statement signed by an officer of Great Wall purportedly certifying that an Installment is due in accordance with the Contract would not be inconformity [ sic ] with the terms of the [Letter of Credit], and therefore may not be honored on presentation by Interaudi Bank." ( Id. at 1-2.) The Yammines enclosed a copy of the Decree with their letter. (Audi Decl. ¶ 9.)
Shortly after receiving this letter, on August 14, 2013, Interaudi removed funds representing the discounted value of the Letter of Credit from Great Wall's Interaudi account, where it had previously deposited those funds, and replaced them in Interaudi's own account. ( See Interaudi Counter 56.1 ¶ 21; Yammine Decl. ¶ 37.) In a letter dated that same day, Interaudi informed Hoet that it had " decided to reverse and annul the acceptance certificates and related discounting o[f] August 2, 2013." (Golenbock Decl. Ex. 8.) Interaudi gave two reasons for this decision. First, Interaudi explained that the Decree " clearly states" that Great Wall " is the owner of the assembly plant you supposedly sold to ICA," and therefore that Hoet " cannot conclude and certify on August 2, 2013 that the shares and assembly plant have been sold or purchased by ICA." ( Id. ) Second, Interaudi stated that Hoet " certainly knew," when he requested that the Letter of Credit be discounted, " that the assets of Great Wall . . . had been expropriated[,] as this was published three days" before the discounting transaction on August 2, 2013. ( Id. ) Interaudi concluded the letter by informing Hoet that, despite Interaudi's decision to " reverse" the discounting, Interaudi would continue to honor the Letter of Credit. Interaudi wrote: " [w]e would also like to inform you that our Letter of Credit . . . of which you are the beneficiary is still valid until December 2014 and will be honored upon proper presentation." ( Id. )
On December 17, 2013, Hoet and Hirsch wrote to Interaudi with a demand requesting payment of the first installment due under the Letter of Credit. (Interaudi Counter 56.1 ¶ 24.) Interaudi refused to pay the demand on technical grounds, but
also stated that Great Wall's demand " is not in conformity with reality facts [ sic] per [the Decree]." (Golenbock Decl. Ex. 9.) Hoet and Hirsch submitted a revised demand ten days later. (Interaudi Counter 56.1 ¶ 26.) On January 7, 2014, Interaudi rejected the revised demand on slightly different technical grounds, but again informed Great Wall that its demand " is not ...