“The possibility 17 that adequate compensatory or other corrective relief will be available at a later date, in the 18 ordinary course of litigation, weighs heavily against a claim of irreparable harm” (internal 19 citation omitted)
How later courts described this case
- “The possibility 17 that adequate compensatory or other corrective relief will be available at a later date, in the 18 ordinary course of litigation, weighs heavily against a claim of irreparable harm” (internal 19 citation omitted)
- concluding that 2 “‘unsettled situation in Iran’ [wa]s simply insufficient to release any party from obligations 3 under the letter of credit” and finding no irreparable harm where monetary damages would 4 be adequate.
Written by the judges who cited it.
The opinion
1
2
3
4
5
6
7
8 UNITED STATES DISTRICT COURT
9 SOUTHERN DISTRICT OF CALIFORNIA
10
11 CONSOLIDATED ELECTRICAL Case No.: 23-CV-2353 TWR (DEB)
DISTRIBUTORS, INC., a Delaware
12
corporation, ORDER DENYING PLAINTIFF’S EX
13 PARTE APPLICATION FOR
Plaintiff,
(1) TEMPORARY RESTRAINING
14
v. ORDER, AND (2) ORDER TO SHOW
15 CAUSE WHY PRELIMINARY
UNITED RENEWABLE ENERGY CO.,
INJUNCTION SHOULD NOT ISSUE
16 LTD., a Taiwanese corporation dba
URECO; BANK OF AMERICA, National
17 (ECF No. 3)
Association, a corporation,
18
Defendants.
19
20 Presently before the Court are Plaintiff Consolidated Electrical Distributors, Inc.’s
21 Ex Parte application for (1) Order to Show Cause Why a Preliminary Injunction Should
22 Not Issue and (2) Temporary Restraining Order (“TRO”) (ECF No. 3, “Ex Parte Mot.”);
23 Plaintiff’s Memorandum of Points and Authorities in support of its Ex Parte Motion (ECF
24 No. 3-1, “Mem.”); Defendant United Renewable Energy Co.’s (“URECO”) Opposition to
25 Plaintiff’s Ex Parte Motion (ECF No. 15, “Opp’n”); Plaintiff’s Reply to URECO’s
26 Opposition (ECF No. 16, “Reply”); URECO’s Surreply in support of its Opposition (ECF
27 No. 23, “Surreply”); and Bank of America’s (“BOA”) Response to Ex Parte Motion (ECF
28 No. 14, “BOA Resp.”). The Court held a hearing on January 25, 2024. (See ECF No. 24
1 (the “Jan. 25 Hearing”).) Having reviewed the Parties’ submissions and the relevant law,
2 the Court DENIES the Ex Parte Motion.
3 BACKGROUND
4 On December 28, 2020, Plaintiff entered into a non-exclusive Distribution
5 Agreement with URECO, a Taiwanese corporation that manufactures and sells solar
6 panels. (Compl. ¶ 8; see also id. Ex. 1 (Distribution Agreement).) The Distribution
7 Agreement contained, among other things, a price protection provision that entitled
8 Plaintiff to a rebate for the price difference on any products purchased from URECO within
9 a specific time frame. (Id. ¶ 10.)
10 On January 1, 2022, the Parties amended the Distribution Agreement (the “First
11 Amendment”). (Id. ¶ 13; see also id. Ex. 2 (First Amendment).) The First Amendment
12 required Plaintiff to obtain a standby letter of credit to cover Plaintiff’s credit line with
13 URECO. (Id. ¶ 16.) Accordingly, Plaintiff obtained an Irrevocable Letter of Credit (the
14 “LOC”) from BOA for $35,000,000 on July 19, 2022. (Id. ¶ 17; see also id. Ex. 3 (LOC).)
15 In early 2022, the Parties grew concerned over the U. S. government’s plan to impose
16 tariffs on foreign solar panels. (Opp’n at 2.) Because these tariffs could create “a risk of
17 great loss” to it, URECO sent a letter, dated April 12, 2022, to Plaintiff, in which URECO
18 proposed higher prices for products that arrived or were arriving at U.S. ports after
19 March 30, 2022, but agreed to give Plaintiff a rebate if the tariff did not go into effect and
20 the right to cancel certain orders (the “April 12 Letter”). (Compl. ¶¶ 19–20; see also id.
21 Ex. 4 (the April 12 Letter).) Specifically, the April 12 Letter provides:
22
1. Raise price of $0.10 usd/w (10 cents/watt) to all modules arrived and
23 arriving to US ports after 2022/03/30.
2. URECO will return 40% rebate of the difference between the actual, if
24
lower, and $0.10 usd/w (10 cents/watt).
25 3. If by any chance the tariff is over the raised price, 10 cents/watt, we
will not return the raised price, 3% rebate and 0.25% marketing rebate
26
back to CED Greentech since URECO is at a loss.
27 4. Any product on the water or arrived in the U.S cannot be canceled and
will apply to this agreement until further clarification.
28
1 It is the last of these provisions that is central to the instant dispute. For its part,
2 Plaintiff considers the April 12 Letter a “Second Amendment” to the Distribution
3 Agreement. (Compl. ¶ 20.) Plaintiff takes the position that it agreed to the higher pricing
4 in return for URECO’s agreement that Plaintiff could cancel, without penalty, some open
5 and future purchase orders for goods that URECO had not shipped to the United States and
6 that had not left their point of origin. (Compl. ¶ 19; see also ECF No. 3-2 (Declaration of
7 Daniel Fadden (“Fadden Decl.”)) ¶ 16.) URECO, on the other hand, considers the April 12
8 Letter a “side agreement.” (ECF 15-1 (Declaration of Chienping Hsieh (“Hsieh Decl.”))
9 ¶ 4.) URECO states the terms of the April 12 Letter were in effect only during the period
10 when the higher price was in effect and any cancellation right that might have existed under
11 the April 12 Letter ended on June 6, 2022, when President Biden announced a two-year
12 moratorium on solar panel tariffs. (Opp’n at 25.)
13 On December 11, 2023, URECO’s counsel sent Plaintiff’s counsel numerous
14 invoices totaling $37,308,345.00 with twenty-one-day payment terms. (Compl. ¶ 28.)
15 Plaintiff contends all the invoices received from URECO on that date concern orders
16 canceled under the Second Amendment and URECO failed to deliver the materials
17 described in the orders to Plaintiff. (Id.) To prove that it had the cancellation rights,
18 Plaintiff points to email communications between Plaintiff’s and URECO’s agents between
19 November 28, 2022, and January 10, 2023—after the supposed June 6, 2022 expiration of
20 Plaintiff’s cancellation rights—seeking cancellation of thirty containers of goods. (Fadden
21 Decl. ¶ 22–23; see also Fadden Decl. Ex. 5.) URECO takes the position that even though
22 it accepted the cancellation of thirty-nine (not thirty, as Plaintiff states) containers of goods
23 on that occasion, it had refused to accept Plaintiff’s request on others. (Hsieh Decl. ¶ 6.)
24 In support, URECO has provided a June 13, 2023 email, in which it refused to accept a
25 cancellation request from Plaintiff. (Hsieh Decl. Ex. 9.) URECO further clarifies that it
26 never requested that Plaintiff take delivery of those thirty-nine containers and that it is not
27 pursuing payment for them either. (Hsieh Decl. ¶ 6.) Instead, it seeks payment for two
28 / / /
1 hundred and twenty-eight containers of goods, valued at more than $37 million, that are
2 sitting in a U.S. warehouse because Plaintiff has refused to accept delivery. (Id. ¶ 7.)
3 On January 5, 2024, believing URECO would imminently draw on the $35,000,000
4 LOC from BOA, Plaintiff filed the instant Ex Parte Motion to temporarily enjoin BOA
5 from making any payments to URECO under the LOC. (Mem. at 7.) In the meantime,
6 URECO agreed not to seek payment from BOA until January 26, 2024, after the hearing
7 scheduled in this matter. (ECF No. 18 at 2.) BOA takes no position regarding the
8 underlying contract dispute and submits to the Court’s decision. (See BOA Resp. at 2.)
9 LEGAL STANDARD
10 Federal Rule of Civil Procedure 65 authorizes a trial judge to grant a TRO under
11 certain circumstances “to preserve the status quo and the rights of the parties until a final
12 judgment issues in the cause.” See Ramos v. Wolf, 975 F.3d 872, 887 (9th Cir. 2020)
13 (quoting U.S. Philips Corp. v. KBC Bank N.V., 590 F.3d 1091, 1094 (9th Cir. 2010)). “A
14 preliminary injunction [or temporary restraining order] . . . is not a preliminary
15 adjudication on the merits[,] but rather a device for preserving the status quo and preventing
16 the irreparable loss of rights before judgment.” Id. (alteration in original) (quoting Sierra
17 On-Line, Inc. v. Phx. Software, Inc., 739 F.2d 1415, 1422 (9th Cir. 1984)). The status quo
18 in this context “refers not simply to any situation before the filing of a lawsuit, but instead
19 to ‘the last uncontested status which preceded the pending controversy[.]’” See GoTo.com,
20 Inc. v. Walt Disney Co., 202 F.3d 1199, 1210 (9th Cir. 2000) (quoting Tanner Motor Livery,
21 Ltd. v. Avis, Inc., 316 F.2d 804, 809 (9th Cir. 1963)).
22 “The standard for issuing a temporary restraining order is identical to the standard
23 for issuing a preliminary injunction.” Lockheed Missile & Space Co. v. Hughes Aircraft
24 Co., 887 F. Supp. 1320, 1323 (N.D. Cal. 1995). “A party seeking a preliminary injunction
25 must meet one of two variants of the same standard.” Ramos, 975 F.3d at 887 (quoting All.
26 for Wild Rockies v. Pena, 865 F.3d 1211, 1217 (9th Cir. 2017)).
27 / / /
28 / / /
1 Under the original standard, plaintiffs seeking a preliminary injunction must
establish that: (1) they are likely to succeed on the merits; (2) they are likely
2
to suffer irreparable harm in the absence of preliminary relief; (3) the balance
3 of equities tips in their favor; and (4) an injunction is in the public interest.
4 Id. (citing Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20 (2008)). “The Ninth Circuit
5 employs an alternative ‘serious questions’ standard, also known as the ‘sliding scale’
6 variant of the Winter standard.” Id. (citing All. for Wild Rockies v. Cottrell, 632 F.3d 1127,
7 1134 (9th Cir. 2011)).
8 Under this alternate standard, [the court] weigh[s] the preliminary injunction
9 factors on a sliding scale, such that where there are only serious questions
going to the merits—that is, less than a likelihood of success on the merits—
10 a preliminary injunction may still issue so long as the balance of hardships
11 tips sharply in the plaintiff’s favor and the other two factors are satisfied.
12 Id. at 887–88 (internal quotation marks omitted) (quoting Short v. Brown, 893 F.3d 671,
13 675 (9th Cir. 2018)). In other words, “[a] preliminary injunction may be granted . . . where
14 the moving party demonstrates either ‘(1) a combination of probable success on the
15 merits and the possibility of irreparable injury or (2) the existence of serious questions
16 going to the merits and that the balance of hardships tips sharply in [its] favor.’” Grocery
17 Outlet Inc. v. Albertson’s Inc., 497 F.3d 949, 951 (9th Cir. 2007) (emphasis and second
18 alteration in original) (quoting Sardi’s Rest. Corp. v. Sardie, 755 F.2d 719, 723 (9th Cir.
19 1985)).
20 A preliminary injunction is an “extraordinary remedy that may only be awarded
21 upon a clear showing that the plaintiff is entitled to such relief.” Winter, 555 U.S. at 22.
22 Consequently, there are several limitations on when “[t]he court may issue a temporary
23 restraining order without written or oral notice to the adverse party or its attorney,” see
24 Fed. R. Civ. P. 65(b), and “[t]he court may issue a . . . temporary restraining order only if
25 the movant gives security in an amount that the court considers proper to pay the costs and
26 damages sustained by any party found to have been wrongfully enjoined.” See Fed. R.
27 Civ. P. 65(c). Further, “every restraining order must: (A) state the reasons why it issued;
28 (B) state its terms specifically; and (C) describe in reasonable detail—and not by referring
1 to the complaint or other document—the act or acts restrained or required.” Fed. R. Civ.
2 P. 65(d)(1).
3 “In deciding a motion for a preliminary injunction, the district court ‘is not bound to
4 decide doubtful and difficult questions of law or disputed questions of fact.’” Int’l
5 Molders’ & Allied Workers’ Loc. Union No. 164 v. Nelson, 799 F.2d 547, 551 (9th Cir.
6 1986) (quoting Dymo Indus., Inc. v. Tapewriter, Inc., 326 F.2d 141, 143 (9th Cir. 1964)).
7 Whether to “grant . . . a preliminary injunction is a matter committed to the discretion of
8 the trial judge[,]” and that decision will be “reverse[d] only if that discretion is abused or
9 the decision is based on an erroneous legal standard or clearly erroneous findings of fact.”
10 See Sierra On-Line, 739 F.2d at 1421.
11 ANALYSIS
12 Through the instant Ex Parte Motion, Plaintiff seeks temporarily to enjoin BOA
13 from making any payments to URECO under the LOC. (See generally Ex Parte Mot.;
14 Mem.) The Court therefore analyzes Plaintiff’s request under the Winter factors.
15 I. Likelihood of Success on the Merits
16 Depending on its showing of irreparable harm, Plaintiff must demonstrate either a
17 probability of success on the merits or the existence of serious questions going to the
18 merits. Grocery Outlet Inc., 497 F.3d at 951 (quoting Sardi’s Rest., 755 F.2d at 723.
19 Plaintiff argues it is likely to succeed on the merits because URECO cannot demand
20 payment from BOA since there is undisputed evidence that Plaintiff properly canceled
21 orders under the terms of the April 12 Letter. (Ex Parte Mot. at 7–8.)
22 California Commercial Code § 5109(b) authorizes a court to enjoin the issuer of a
23 letter of credit from honoring a demand for payment from a beneficiary if honoring the
24 demand would facilitate fraud. Hendricks v. Bank of Am., N.A., 408 F.3d 1127, 1139 (9th
25 Cir. 2005) (internal citation omitted). In the absence of fraud, an issuer must honor a letter
26 of credit if the beneficiary has complied with its terms and conditions. See generally Mitsui
27 Mfrs. Bank v. Texas Com. Bank-Fort Worth, 159 Cal. App. 3d 1051, 1055 (1984). Whether
28 a beneficiary has complied with the presentation terms of a letter of credit implicates what
1 is known as the “independence principle.” San Diego Gas & Elec. Co. (“SDG&E”) v.
2 Bank Leumi, 42 Cal. App. 4th 928, 933–34 (1996). Under this principle, an issuer must
3 honor a demand for payment that complies with the presentation terms of a letter of credit
4 regardless of whether there is performance or non-performance of the underlying contract.
5 Id.
6 URECO argues the Court cannot enjoin BOA because of the independence principle,
7 and Plaintiff has not shown that the fraud exception applies to this case. (Opp’n at 8–15.)
8 Although Plaintiff failed to discuss either of these doctrines in its Ex Parte Motion and
9 only raised them for the first time in its Reply when responding to URECO’s opposition,1
10 (compare Mem., with Reply), the Court examines each of URECO’s arguments in turn.
11 A. Independence Principle
12 The independence principle is codified in California Commercial Code § 5103(d),
13 which states:
14 rights and obligations of an issuer to a beneficiary or a nominated person
under a letter of credit are independent of the existence, performance, or
15
nonperformance of a contract or arrangement out of which the letter of credit
16 arises or which underlies it, including contracts or arrangements between the
issuer and the applicant and between the applicant and the beneficiary.
17
18 The independence principle “is based on two policy considerations. First, the issuing bank
19 can assume no liability for the performance of the underlying contract because it has no
20 control over making the underlying contract or over selection of the beneficiary. Second,
21 the letter of credit would lose its commercial vitality if, before honoring drafts, the issuing
22 bank were obliged to look beyond the terms of the letter of credit to the underlying
23 contractual controversy between its customer and the beneficiary.” Id. (cleaned up). Thus,
24 the California Supreme Court had observed that the beneficiary of a letter of credit owes
25 no obligations to the issuer and “literal compliance with the letter of credit’s terms for
26
27
1 The Court “need not consider arguments raised for the first time in a reply brief.” Zamani v.
28
1 payment is all that is required.” W. Sec. Bank v. Super. Ct., 15 Cal. 4th 232, 249 (1997).
2 One of the implications of the independence principle is that unless a letter of credit
3 references the underlying contract and explicitly creates a condition for honoring a demand
4 for payment, a court cannot consider the underlying contract to interpret the presentation
5 terms of a letter of credit. Andy Marine, Inc. v. Zidell, Inc., 812 F.2d 534, 537 (9th Cir.
6 1987).
7 Under the independence principle, URECO contends the Court is unable to consider
8 Plaintiff’s allegation that URECO breached the underlying Distribution Agreement
9 because there is no explicit language in the LOC tying it to the Distribution Agreement.
10 (See generally Opp’n at 8–11.) Plaintiff, in turn, argues the Court may consider the merits
11 of its dispute with URECO under the Distribution Agreement because the LOC conditions
12 payment on the Parties’ performance under the Distribution Agreement. (See generally
13 Reply at 4–6.) In support of this argument, Plaintiff points to the second requirement of
14 the LOC’s section labeled “Undertaking Terms and Conditions” provided below:
15 WE HEREBY ISSUE THIS IRREVOCABLE LETTER OF CREDIT NO.
68139776 IN [URECO’S] FAVOR, FOR THE ACCOUNT OF
16
[PLAINTIFF], FOR UP TO AN AGGREGATE AMOUNT OF USD
17 35,000,000.00 AVAILABLE BY YOUR DRAFT(S) DRAWN ON US AT
SIGHT, ACCOMPANIED BY THE FOLLOWING:
18
19 1. A COPY OF THE ORIGINAL LETTER OF CREDIT AND ALL
AMENDMENTS THERETO, IF ANY.
20
2. A DATED STATEMENT SIGNED BY AN AUTHORIZED
21
OFFICER OF THE BENEFICIARY ON BENEFICIARY’S
22 LETTERHEAD READING AS FOLLOWS:
23 WE CERTIFY THAT THE AMOUNT DRAWN
24 REPRESENTS UNPAID ITEMS OF CONSOLIDATED
ELECTRICAL DISTRIBUTORS, INC. AND/OR
25 INDEBTEDNESS OWING BY CONSOLIDATED
26 ELECTRICAL DISTRIBUTORS, INC., WHICH HAS
BEEN PAID, BUT WHICH PA[Y]MENT, OR A
27 PORTION THEREOF, WAS PAID WITHIN NINETY
28 (90) DAYS OF A PETITION FILED BY OR AGAINST
1 CONSOLIDATED ELECTRICAL DISTRIBUTORS,
INC. UNDER THE BANKRUPTCY CODE OR OTHER
2
INSOLVENCY STATUTE. COPY(IES) OF INVOICES
3 MARKED ‘UNPAID’ ARE ATTACHED.
4 3. COPY(IES) OF INVOICES MARKED “UNPAID[.”] THE
5 COPY(IES) OF UNPAID INVOICES DATED PRIOR TO THE
STANDBY LETTER OF CREDIT ISSUING DATE ARE
6 ACCEPTABLE.
7
8 (Compl. Ex. 3 at 26 (emphasis added).) Under the independence principle, if URECO
9 complies with the three requirements articulated in the “Undertaking Terms and
10 Conditions” section of the LOC, BOA must honor its demand. SDG&E, 42 Cal. App. 4th
11 at 933–34. Nonetheless, Plaintiff argues that because the LOC requires a signed statement
12 from URECO certifying that the amount drawn represents Plaintiff’s “unpaid” items, the
13 LOC is tied to the underlying Distribution Agreement. (Reply at 5.) Accordingly, relying
14 solely on Steinmeyer v. Warner Consolidated Corporation, 42 Cal. App. 3d 515 (1974),
15 (see Reply at 4), Plaintiff requests the Court to determine whether there are unpaid items
16 under the terms of the Distribution Agreement. (Id. at 5.)
17 The Court declines to follow Steinmeyer. In Ground Air Transfer, Inc. v. Westates
18 Airlines, Inc., 899 F.2d 1269 (1st Cir. 1990), the First Circuit read Steinmeyer as creating
19 a special letter of credit rule. Id. at 1275. It observed that the California Supreme Court
20 would be unlikely to “follow Steinmeyer insofar as it significantly weakens the principle
21 of ‘independence’ of the letter of credit.” Id. The Court agrees and finds persuasive the
22 reasoning of Export-Import Bank of the United States v. United California Discount Corp.,
23 738 F. Supp. 2d 1047, 1056 (C.D. Cal.), as amended (Dec. 7, 2010), aff’d, 484 F. App’x
24 91 (9th Cir. 2012). In Export-Import Bank, UPS Capital Business Credit (“UPS”) issued
25 two letters of credit to the Ministry of Education of the Kingdom of Jordan (the “MOE”)
26 to support the underlying contract that UPS’s debtor, Ashford International Inc.
27 (“Ashford”), had with the MOE. Id. at 1049–52. UPS conditioned the issuance of its two
28 letters of credit to MOE on Ashford obtaining two letters of credit of equal value for the
1 benefit of UPS, which Ashford got from United California Discount Corp. (“UCDC”). Id.
2 UPS subsequently assigned its rights to all the instruments incident to Ashford’s
3 indebtedness to the plaintiff, Export-Import Bank of the U.S. (“EIB”). Id. When Ashford
4 defaulted, UCDC refused to honor EIB’s demand for payment because UCDC claimed that
5 the letters of credit it had issued required EIB to show that Ashford had failed to perform
6 under its underlying contract with the MOE. Id. The UCDC letters of credit provided:
7
THE AMOUNT OF OUR DRAFT REPRESENTS FUNDS DUE U.S. AS A
8 RESULT OF DRAWING OF OUR LETTER OF CREDIT BY ORDER OF
ASHFORD INTERNATIONAL, INC. UNDER THE TERMS OF THE
9
CONTRACT NO. (1/27/2000); LOAN NO. 3684–JO ISSUED BY
10 MINISTRY OF EDUCATION–THE HASHEMITE KINGDOM OF
JORDAN.
11
12 Id. at 1056. The court concluded that this “general reference to the contract between
13 Ashford and the MOE [wa]s insufficient to create an explicit condition precedent for
14 payment under the UCDC LOCs.” Id. at 1057. Instead, in light of the plain language of
15 the UCDC letters of credit and their purpose as standby letters of credit, EIB was entitled
16 to draw upon the UCDC letters of credit when the MOE demanded payment on the letters
17 of credit issued by UPS. Id. In reaching this conclusion, the court relied on Andy Marine,
18 Inc. v. Zidell, Inc., 812 F.2d 534 (9th Cir. 1987), in which the Ninth Circuit observed that,
19 “[i]n the absence of clear evidence that the parties intended the letter to include
20 nondocumentary conditions, it defeats the whole purpose of the letter of credit to examine
21 the rights and wrongs of a contract dispute to determine whether the letter should be paid.”
22 Id. at 537.
23 Here, as in Export-Import Bank, the plain language of the LOC does not condition
24 payment under the LOC to performance under the underlying contract. Instead, the plain
25 language of the LOC provides that URECO is entitled to make a demand on the LOC when
26 there are “unpaid items.” (See Compl. Ex. 3 at 26.) As in Export-Import Bank, absent any
27 evidence that the Parties intended to condition payment on non-performance under the
28 Distribution Agreement, the Court need not delve into the merits of their underlying
1 contract dispute. Because none of the documents the Parties have submitted show that they
2 intended to condition payment on a failure to perform the underlying contract, the Court
3 finds that the LOC is independent of the Distribution Agreement. Accordingly, to succeed
4 on the merits, Plaintiff must show that URECO’s demand for payment on the LOC would
5 amount to material fraud. See Mitsui Mfrs. Bank, 159 Cal. App. 3d at 1057.
6 B. Fraud Exception
7 Under the fraud exception to the independence principle, Plaintiff must demonstrate
8 that URECO’s “demand for payment on the . . . LOC[ would be] . . . ‘forged or materially
9 fraudulent, or honor of the presentation would facilitate a material fraud by the beneficiary
10 on the issuer or applicant.’” Exp.-Imp. Bank, 738 F. Supp. 2d at 1059 (quoting Cal. Com.
11 Code § 5109(a)). “A material fraud occurs where the underlying contract deprives the
12 beneficiary of even a colorable right to drawn upon the letter of credit.” Id. (internal
13 quotation marks omitted) (quoting Ground Air Transfer, Inc., 899 F.2d at 1273); see also
14 Ground Air Transfer, Inc., 899 F.2d at 1273 (holding that a court may enjoin payment on
15 letter of credit only when “the contract deprives beneficiary of even a colorable right to do
16 so,” “circumstances reveal that the beneficiary’s demand for payment has absolutely no
17 basis in fact,” or “the beneficiary’s conduct has so vitiated the entire transaction that
18 legitimate purposes of the independence of the issuer’s obligation would no longer be
19 served” (internal quotation marks omitted)).
20 Plaintiff argues that any certification by URECO that the amount drawn on the letter
21 of credit represents unpaid items under the Distribution Agreement would constitute
22 material fraud because there are no outstanding invoices given Plaintiff’s cancellation of
23 the underlying orders pursuant to the cancellation provision in the April 12 Letter. (Reply
24 at 6–7; Compl. ¶¶ 19–20.) URECO, on the other hand, claims the cancellation provision
25 of the April 12 Letter ended on June 6, 2022, when President Biden announced the tariff
26 moratorium. (Opp’n at 24–25; Hsieh Decl. ¶ 5.) Both the Parties have provided the Court
27 with numerous emails and text messages supporting their respective versions of the story.
28 Because the record evidences a genuine dispute as to whether Plaintiff’s cancellation right
1 extended past June 6, 2022, the Court must conclude that URECO has a colorable claim.
2 Further, Plaintiff conceded at oral argument that the invoices URECO submitted are
3 genuine and relate to actual purchase orders from Plaintiff. Finally, Plaintiff’s reliance on
4 Mitsui Manufacturers Bank is unavailing because, unlike in this case, there was evidence
5 in Mitsui that the beneficiary had provided an untruthful certification statement. 159 Cal.
6 App. 3d at 1056. Because Plaintiff has failed to establish material fraud under the facts of
7 this case, Plaintiff cannot establish any probability of success on the merits under the fraud
8 exception to the independence principle.
9 II. Irreparable Harm
10 “The basis of injunctive relief in the federal courts is irreparable harm and
11 inadequacy of legal remedies.” Los Angeles Mem’l Coliseum Comm’n v. Nat’l Football
12 League, 634 F.2d 1197, 1202 (9th Cir. 1980) (internal citation omitted). “[P]laintiffs must
13 establish that irreparable harm is likely, not just possible, in order to obtain a preliminary
14 injunction.” All. for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1131 (9th Cir. 2011)
15 (internal citation omitted). An injury is irreparable if a court cannot remedy the harm
16 through monetary remedies. Sampson v. Murray, 415 U.S. 61, 90 (1974) (“The possibility
17 that adequate compensatory or other corrective relief will be available at a later date, in the
18 ordinary course of litigation, weighs heavily against a claim of irreparable harm” (internal
19 citation omitted)).
20 Plaintiff argues that monetary damages will be inadequate here for several reasons.
21 First, there is no automatic recognition of foreign judgments in Taiwan. (Mem. at 9–10).
22 Instead, “under Article 4-1 of the Taiwanese Compulsory Enforcement Act, a foreign
23 judgment must receive an ‘approving judgment’ from a court in Taiwan to be enforceable.”
24 (Id. at 10.) “Consequently, if [Plaintiff] obtains a judgment in this action, it may be unable
25 to execute on the judgment in Taiwan.” (Id.) Even though Taiwan does not
26 “automatically” recognize foreign judgments, however, it appears that it has a process for
27 recognizing them. (See id. at 9–10.) Generally, the difficulty of bringing an action in a
28 foreign jurisdiction, without more, does not constitute irreparable harm. See e.g., KMW
1 Intern. v. Chase Manhattan Bank, N.A., 606 F.2d 10, 16 (2d Cir. 1979) (concluding that
2 “‘unsettled situation in Iran’ [wa]s simply insufficient to release any party from obligations
3 under the letter of credit” and finding no irreparable harm where monetary damages would
4 be adequate.); Enter. Int’l, Inc. v. Corporacion Estatal Petrolera Ecuatoriana, 762 F.2d
5 464, 473 (5th Cir. 1985) (observing that courts generally refuse to grant injunctive relief
6 when it has been shown that foreign courts provide a legal remedy or, at worst, that access
7 to foreign courts is speculative (collecting cases)). “[W]hile the need to resort to the legal
8 processes of [a foreign jurisdiction] might well complicate [] enforcement efforts, … these
9 complexities do not rise to the extraordinary level sufficient to warrant a finding of
10 irreparable harm.” Fluor Daniel Argentina, Inc. v. ANZ Bank, 13 F. Supp. 2d 562, 565
11 (S.D.N.Y. 1998). Plaintiff’s speculation that it “may be” unable to execute judgment in
12 Taiwan falls short of establishing that irreparable injury absent preliminary injunctive relief
13 is likely, as opposed to merely possible. See All. for the Wild Rockies, 632 F.3d at 1131.
14 Second, in Rockwell International Systems, Inc. v. Citibank, N.A., 719 F.2d 583 (2d
15 Cir. 1983), the district court granted a preliminary injunction when it was “highly probable
16 that the Hague Tribunal [would] refuse to accept jurisdiction over plaintiff’s claims.”
17 (Reply at 8.) This case implicates a similar issue because Taiwan is not a signatory to
18 Hague Convention on service of process or any other international agreement that governs
19 service of process. (Id.) Even if Taiwan is not a signatory to the Hague Convention on
20 service of process, however, there are other recognized methods for effectuating service in
21 non-signatory countries. See, e.g., Yvonne A. Tamayo, Catch Me If You Can: Serving
22 United States Process on an Elusive Defendant Abroad, 17 Harv. J.L. & Tech. 211, 243
23 (2003).
24 Third and finally, Plaintiff contends that even though URECO’s Taiwanese status
25 was foreseeable, Plaintiff sought to avoid the risk of litigating in Taiwan by incorporating
26 a forum selection clause in the Distribution Agreement, which provides California courts
27 personal jurisdiction over URECO for any dispute between the Parties arising under the
28 Distribution Agreement. (Mem. at 9.) The Distribution Agreement, however, is distinct
1 from the LOC. See supra Section I.A. In any event, Plaintiff assumed the risk of enforcing
2 a money judgment in Taiwan because such transnational enforcement actions are a
3 foreseeable consequence of relying on letters of credit when structuring transactions with
4 an international company. See Fluor Daniel Argentina, Inc. v. ANZ Bank, 13 F. Supp. 2d
5 562, 565 (S.D.N.Y. 1998).
6 Ultimately, the Court concludes that Plaintiff’s arguments are unavailing and that
7 Plaintiff has failed to establish that monetary damages would not suffice to remedy any
8 harm Plaintiff might suffer.
9 III. Totality of the Circumstances
10 Because Plaintiff has failed to establish either serious questions going to the merits
11 or a likelihood of irreparable harm, the Court finds that neither a temporary restraining
12 order nor a preliminary injunction is warranted under either of the two Winter standards
13 articulated by the Ninth Circuit. Although analysis of the remaining Winters is unnecessary
14 in light of these conclusions, the Court further notes it would be inequitable to preclude
15 URECO from obtaining the benefits of the LOC that it expressly bargained for with
16 Plaintiff. See SDG&E, 42 Cal. App. 4th 928 at 934 (“One of the expected advantages and
17 essential purposes of a letter of credit is that the beneficiary will be able to rely on assured,
18 prompt payment from a solvent party; necessarily, a part of this expectation of ready
19 payment is that there will be a minimum of litigation and judicial interference, and this is
20 one of the reasons for the value of the letter of credit device in financial transactions.”
21 (cleaned up)).
22 / / /
23 / / /
24 / / /
25 / / /
26 / / /
27 / / /
28 / / /
l CONCLUSION
2 For reasons set forth above, the Court DENIES Plaintiff's Ex Parte Motion for
3 ||(1) Order to Show Cause Why a Preliminary Injunction Should Not Issue and
4 ||(2) Temporary Restraining Order (ECF No. 3).
5 IT IS SO ORDERED.
6 Dated: February 13, 2024 —_—— (2
[59 \G re
g Honorable Todd W. Robinson
9 United States District Judge
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28