MAM Apparel & Textiles LTD v. NCL Worldwide Logistics USA, Inc.

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

MAM APPAREL & TEXTILES LTD.,

Plaintiff, MEMORANDUM & ORDER

19-CV-3750 (NGG) (RML)

-against-

NCL WORLDWIDE LOGISTICS USA, INC.;

AMERICAN SHIPPING AND LOGISTICS INC.;

EXPRESS TRADE CAPITAL, INC.; SWIFT

TRANSPORTATION LIMITED; BANK LEUMI

USA; and JPMORGAN CHASE BANK, N.A.,

Defendants.

NICHOLAS G. GARAUFIS, United States District Judge.

Plaintiff MAM Apparel & Textiles LTD. (“MAM”) brings this ac-

tion for, inter alia, allegedly wrongful dishonor of certain letters

of credit and fraud. (See generally Compl. (Dkt. 1).) Defendant

Bank Leumi USA now moves to dismiss the claims against it pur-

suant to Fed. R. Civ. P. 12(b)(6). (See Mot. to Dismiss (Dkt. 25);

Mem. in Supp. of Mot. (“Mem.”) (Dkt. 26); Mem. in Opp. to Mot.

(“Opp.”) (Dkt. 27); Reply (Dkt. 29).) For the following reasons,

Bank Leumi’s motion is GRANTED.

BACKGROUND

The following factual summary is drawn from the facts alleged

in the complaint, which the court generally accepts as true. See

N.Y. Pet Welfare Ass’n v. City of New York, 850 F.3d 79, 86 (2d

Cir. 2017).1 The court also considers those documents attached

to the complaint or incorporated by reference, documents over

which it may take judicial notice, and documents so central to

the complaint as to be considered integral thereto. Id. Further,

1 When quoting cases, unless otherwise noted, all citations and internal

quotation marks are omitted and all alterations are adopted.

while the complaint contains allegations against each Defendant,

the court summarizes only those facts relevant to MAM’s claims

against Bank Leumi.

MAM is a foreign corporation which conducts business in Bang-

ladesh. (Compl. ¶ 1.) Bank Leumi is a New York State chartered

bank. (Id. ¶ 8.) In or around February 2017, Defendant Express

Trade Capital, Inc. ordered approximately 69,156 pieces of ap-

parel totaling $96,530.25 from MAM (the “February Order”).2

(Id. ¶ 20.) The February Order was processed in two shipments,

pursuant to two commercial invoices. (Id. ¶ 21.) The first ship-

ment contained 25,040 pieces totaling $34,951.67, and the

second shipment contained 44,116 pieces totaling $61,578.58.

(Id.) The February Order was secured by a letter of credit issued

by Bank Leumi to the benefit of Plaintiff (the “L/C”). (Id. ¶ 22;

see also L/C (Dkt. 1 at ECF 23-25).)

The L/C provides for the release of funds upon the presentation

of certain documents, including, inter alia: (1) a commercial in-

voice; (2) an ocean bill of lading; (3) a signed telefax; and (4) an

authenticated SWIFT message stating that an authorized repre-

sentative has inspected the goods prior to shipment and that the

shipment is authorized. (L/C at ECF 23.) The L/C further pro-

vides that it is governed by UCP 600, the latest version of the

Uniform Customs and Practice for Documentary Credits (the

“UCP”). (Id. at ECF 24).

On April 9, 2017, Plaintiff (through Basic Bank, its advising bank

in Bangladesh) transmitted shipping documents for the first ship-

ment, specifically a Bill of Exchange, Commercial Invoice,

Packing List, Air Way Bill, Inspection Certificate, and Certificate

2 The complaint alleges that the total value of the February order was

$96.563.30. However, this appears to be an error, given that the combined

value of the shipments comprising the February order is $96,563.25 and

the letter of credit securing said order was in the amount of $96.563.25.

of Origin, with originals and copies, to Bank Leumi. (Compl.

¶ 25.)

On April 14, 2017, approximately five days after Plaintiff trans-

mitted documents for the first shipment, Bank Leumi sent a

SWIFT network message3 to Basic Bank notifying it of discrepan-

cies in the provided documents. (Id. ¶ 27.) Specifically, the

message stated that copies of the of shippers/beneficiary’s de-

tailed telefax and authenticated SWIFT message had not been

presented, the inspection certificate did not conform to the L/C’s

requirement, and that shipment by air was not in accordance

with the L/C’s requirements. (Apr. 14, 2017 SWIFT Mess. (Dkt.

25-2).) Further, the message contained a “77B - /NOTIFY/” code.

(Id.)

On April 17, 2017, Plaintiff, through Basic Bank, transmitted

shipping documents for the second shipment, specifically a Bill

of Exchange, Commercial Invoice, Packing List, Air Way Bill, In-

spection Certificate, and Certificate of Origin, with originals and

copies, to Bank Leumi.. (Compl. ¶ 26.)

On April 25, 2017, approximately eight days after Plaintiff trans-

mitted the documents for the second shipment, Bank Leumi sent

another SWIFT Message to Basic Bank notifying it of discrepant

documents. (Apr. 26, 2017 SWIFT Mess. (Dkt. 25-3).) This mes-

sage was materially identical to the April 14, 2017 message.

On May 16, 2017, Basic Bank sent a SWIFT message to Bank

Leumi inquiring about the payment status of the L/C, to which

Bank Leumi never replied. (Compl. ¶ 31.) On May 23, 2017, the

L/C expired. (L/C at ECF 22.) On June 16, 2017, Bank Leumi

informed Basic Bank that it was discharging the L/C, returning

3 The court takes judicial notice of the fact that Society Worldwide Inter-

bank Financial Telecommunication (“SWIFT”) provides an electronic

communication system by the same name for use in interbank correspond-

ence.

the shipping documents for both shipments of the February Or-

der, and charging MAM a total of $780.00 in fees. (Compl. ¶ 32.)

To date, Bank Leumi has not disbursed any funds to MAM. (Id.

¶ 33.)

LEGAL STANDARD

To survive a motion to dismiss under Rule 12(b)(6), a complaint

must “contain sufficient factual matter, accepted as true, to ‘state

a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal,

556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly,

550 U.S. 544, 570 (2007)). In making this determination, the

court need not credit “threadbare recitals of the elements of a

cause of action, supported by mere conclusory statements.” Id. at

678.

Federal Rule of Civil Procedure 9(b) creates a heightened plead-

ing standard for fraud claims that requires the party alleging

fraud to “state with particularity the circumstances constituting

fraud or mistake.” To satisfy this standard, a complaint must gen-

erally: “(1) specify the statement that the Plaintiff contends were

fraudulent, (2) identify the speaker, (3) state where and when

the statements were made, and (4) explain why the statements

were fraudulent.” Mills v. Polar Molecular Corp., 12 F. 3d 1170,

1175 (2d Cir. 1993).

DISCUSSION

Bank Leumi argues Plaintiff’s claim for wrongful dishonor of the

L/C fails as a matter of law because Plaintiff did not present con-

forming documents. (Mem. at 4.) Bank Leumi further asserts that

it timely and adequately notified Plaintiff of these discrepancies

as required under the UCP. (Id. at 6.) Finally, Bank Leumi argues

that Plaintiff’s fraud claim fails to allege any misrepresentation

and thus fails as a matter of law. (Id. at 7.) For the reasons that

follow, the court agrees and, accordingly, grants Bank Leumi’s

motion.

A. Wrongful Dishonor Claim

1. Plaintiff Did Not Provide Strictly Conforming

Documents

“To prevail on a claim for wrongful dishonor of a letter of credit,

a plaintiff must demonstrate: (1) that there exists a letter of

credit issued by the defendant for the benefit of the plaintiff; (2)

that the plaintiff timely presented conforming documents to the

defendant as required by the letter of credit; and (3) that the de-

fendant failed to pay the plaintiff on the letter of credit.” ACR

Sys., Inc. v. Woori Bank, 232 F. Supp. 3d 471, 478 (S.D.N.Y.

2017). In reviewing a plaintiff’s submission of documents, the

bank has a ministerial role that imparts no obligation to go be-

yond the face of documents. See Mago Int’l v. LHB AG, 833 F.3d

270, 272 (2d Cir. 2016); Alaska Textile Co. v. Chase Manhattan

Bank, N.A., 982 F.2d 813, 816 (2d Cir. 1992). As such, to satisfy

the second element of a wrongful dishonor claim, the plaintiff

must demonstrate strict compliance with the terms of the letter

of credit. See Mago Int’l, 833 F.3d at 272.

Although documents must be precisely conforming, courts in this

circuit have allowed exceptions to this standard for minor varia-

tions. This exception is very narrow, and the variation must be

minor, such as where a word in a document is unmistakably clear

despite a typographical error. See Creaciones con Idea, S.A. de C.V.

v. MashreqBank PSC, 51 F. Supp. 2d 423, 427 (S.D.N.Y. 1999);

see also Bank of Cochin, Ltd. v. Mfrs. Hanover Tr. Co., 612 F. Supp.

1533, 1541 (S.D.N.Y. 1985) (providing five copies of required

documents instead of six copies as specified by letter of credit did

not amount to noncompliance); but see Mago Int’l 833 F.3d at

270 (unsigned bill of lading did not comply with letter of credit’s

requirement that plaintiff “provide a photocopy of a bill of lading

evidencing shipment of the goods to the applicant”).

Here, among other documents, the L/C required: (1) a signed

telefax; (2) an authenticated SWIFT message; and (3) an ocean

bill of lading. Plaintiff alleges it sent Bank Leumi originals and

copies of a Bill of Exchange, Commercial Invoice, Packing List,

Air Way Bill, Inspection Certificate, and Certificate of Origin for

the first shipment on April 9, 2017, and the same for the second

shipment on April 17, 2017. The question, thus, is whether

presentation of these documents constitutes strict compliance

with the L/C’s conditions. The answer to this question is no.

While Plaintiff is correct that minor discrepancies between the

documents presented and the documents required under a letter

of credit are permissible, the discrepancies here are not minor.

First, Plaintiff provided an air way bill instead of an ocean bill of

lading. See Bd. Of Trade of San Francisco v. Swiss Credit Bank, 728

F.2d 1241, 1243 (9th Cir. 1984) (presentation of air way bill

where letter of credit required bill of lading noncompliant as a

matter of law justifying dishonor) (applying prior UCP version);

see also CVD Equip Corp. v. Taiwan Glass Indus. Corp. No. 10-cv-

573 (RJH), 2011 WL 1210199, at *3 (S.D.N.Y. Mar. 21, 2011)

(where letter of credit required “clean on board ocean bill of lad-

ing,” bill of lading that “d[id] not indicate that the shipment was

placed on a ship” was noncompliant as a matter of law). Moreo-

ver, it remains undisputed that Plaintiff did not provide the

required signed telefax, authenticated SWIFT message, and

ocean bill of lading; nor was the inspection certificate as the L/C

required. Completely omitting documents and providing noncon-

forming shipping documents are likewise not “minor variances.”

As such, Plaintiff cannot make out a wrongful dishonor claim.

2. Bank Leumi Timely and Adequately Notified

Plaintiff of Discrepancies.

Notwithstanding Plaintiff’s failure to demonstrate its own strict

compliance, the UCP required Bank Leumi to send notice to

Plaintiff stating that: (1) the bank is refusing to honor or negoti-

ate; (2) each discrepancy in respect of which the bank refuses to

honor or negotiate; and (3) that the bank is holding the docu-

ments pending further instructions from the presenter, or until

the bank receivers a waiver from the applicant, or that the bank

is returning the documents, or that the bank is acting in accord-

ance with instructions previously received from the presenter.

See UCP Art. 16(c). This notice must “be given by telecommuni-

cation or by other expeditious means no later than the close of

the fifth banking day following the day of presentation.” See UCP

Art. 16(d); see also UCP Art. 14(b). Failure to provide such notice

would estop Bank Leumi from asserting that its dishonor was jus-

tified because the presentation was nonconforming. See UCP Art.

16(e); ACE Am. Ins. Co. v. Bank of the Ozarks, No. 11-cv-3146

(PGG), 2014 WL 4953566, at *9 (S.D.N.Y. Sept. 30, 2014) (col-

lecting cases) (analyzing prior UCP version).

In support of its motion, Bank Leumi attached the SWIFT mes-

sages it sent to Basic Bank advising it of the discrepant

presentation. These messages are referenced in the complaint

(see Compl. ¶ 27), and since there is no dispute over their authen-

ticity, the court considers them. Cf. Nicosia v. Amazon.com, Inc.,

834 F.3d 220, 231 (2d. Cir. 2016) (“Even where a document is

considered integral to the complaint, it must be clear on the rec-

ord that no dispute exists regarding authenticity or accuracy of

the document.”).

Plaintiff argues that Bank Leumi’s notices were deficient and un-

timely; the court disagrees as to both contentions. Both the April

14, 2017 and April 26, 2017 SWIFT messages explicitly specify

that the telefax and authenticated SWIFT message were not pre-

sented and that the inspection certificates were not in conformity

with the L/C. Plaintiff does not dispute that it was notified of

these discrepancies. However, Plaintiff argues that such notice

was deficient because Bank Leumi did not “attempt” to provide

notice by telecommunication, as expressed in UCP Art. 16(d).

(Opp. at 11.) This argument is nonsensical. As previously noted,

SWIFT messages are a form of telecommunication. See supra n.2;

see also EM Ltd. v. Republic of Argentina, 695 F.3d 201, 204 n.3

(2d Cir. 2012) (“SWIFT … is an electronic messaging system that

provides instructions to banks, brokerages, and other financial

institutions for money transfers.”).

Plaintiff’s next argument, that the notices were deficient because

Bank Leumi did not notify it that they were holding onto the ship-

ping documents, also fails. Both SWIFT messages contain a “77B-

/NOTIFY/” code, indicating that the documents are being held

until the issuing bank receives a waiver from the applicant and

agrees to accept it or receives further instructions from the pre-

senter.4 It is undisputed that neither Plaintiff nor Basic Bank

provided further instructions or a waiver. Instead, on May 16,

2017, a month after Bank Leumi’s initial SWIFT notification,

Basic Bank inquired as to the payment status of the goods.

(Compl. ¶ 31.) Plaintiff’s argument that Bank Leumi’s silence af-

ter its initial SWIFT notification made Plaintiff believe that it

4 See Standards: Category 7 Documentary Credits and Guarantees, at 172,

available at https://www.swift.com/swift-resource/164981/download.

(“NOTIFY Documents held until the issuing bank receives a waiver from

the applicant and agrees to accept it, or receives further instructions from

the presenter prior to agreeing to accept a waiver.”). The court takes judi-

cial notice of this document; it is publicly available and not subject to

dispute. The court notes, however, that this document is dated April 21,

2017, several days after the first SWIFT message was sent. In the absence

of any United States case law discussing this particular SWIFT code, the

court also takes judicial notice of a decision issued by the Queen’s Bench

Division of the High Court of Justice of England and Wales solely for the

proposition that the NOTIFY code has been in use since at least 2013. See

Bulgrains & Co v Shinhan Bank, [2013] EWHC 2498 (QB) [51] (“Notify …

is another industry term of art clearly and unequivocally understood to

mean: Documents held until the issuing bank receives a waiver from the

applicant and agrees to accept it, or receives further instructions from the

presenter prior to agreeing to accept a waiver.”).

would honor the L/C notwithstanding Bank Leumi’s express no-

tification of noncompliance is also rejected. The notification

specifically alerted Plaintiff that further action was necessary.

Equally unavailing is Plaintiff’s contention that Bank Leumi did

not provide notice of nonconformity by the close of the fifth

banking day following presentation, as required by the UCP.

Presentation takes place when documents are delivered, not

when they are transmitted. See UCP Art. 2. It is undisputed that

documents for the first shipment were sent to Bank Leumi on

April 9, 2017 and that Bank Leumi sent the SWIFT message no-

tifying Plaintiff of discrepancies on April 14, 2017, five calendar

days later. As for the second shipment, Plaintiff alleges transmis-

sion of documents “on or about April 17, 2017” but does not

indicate form of transmission. The L/C requires submission of

documents by overnight courier. (L/C at ECF 24.) Drawing infer-

ences in Plaintiff’s favor and assuming compliance with this

requirement, presentation occurred no earlier than April 18,

2017. The court takes judicial notice of the facts that April 22,

2017 was a Saturday, April 23, 2017 was a Sunday, and that Sat-

urday and Sunday are not banking days. As such, the fifth

banking day after April 18, 2017 was April 25, 2017, the date of

Bank Leumi’s second SWIFT message. As such, this notification

was also timely.

Accordingly, Plaintiff’s wrongful dishonor claim against Bank

Leumi fails as a matter of law and is therefore dismissed.

B. Fraud Claim

As discussed supra, FRCP 9(b) requires a plaintiff to plead fraud

with particularity. Specifically, a fraud complaint should: “(1)

specify the statement that the Plaintiff contends were fraudulent,

(2) identify the speaker, (3) state where and when the state-

ments were made, and (4) explain why the statements were

fraudulent.” Mills, 12 F. 3d at 1175. A plaintiff must also “[a]llege

facts that give rise to a strong inference of fraudulent intent.”

First Capital Asset Mgmt, Inc. v. Satinwood, Inc., 385 F.3d 159,

179 (2d Cir. 2004). “[T]he essence of fraud is misrepresenta-

tion.” United States v. Rutigliano, 887 F.3d 98, 109 (2d Cir.

2018). Simply asserting that a Defendant never intended to per-

form its duties under an agreement does not meet the level of

deliberate fraud. Lomaglio Assocs. v. LBK Marketing Corp., 892 F.

Supp. 89, 95 (S.D.N.Y. 1995).

Here, Plaintiff’s fraud allegations are wholly conclusory. Plaintiff

does not cite statements, speakers, or any misrepresentations

made by Bank Leumi. Further, Plaintiff provides no substantive

allegations suggesting any fraudulent intent. Plaintiff concedes

that, despite being notified of discrepant shipping documents,

Basic Bank failed to obtain a waiver or attempt to correct the dis-

crepancies. Nonpayment occurred at the fault of Plaintiff; no

fraudulent intent or malice can be assumed.

Further, Plaintiff’s claim that all Defendants named in the com-

plaint “effectuated a plan designed to procure … [g]oods …

without full payment tendered to the Plaintiff” (Compl. ¶ 101),

does not meet FRCP 9(b)’s pleading standard. Plaintiff alleges no

facts supporting an inference that Bank Leumi was ever even in

contact with the other Defendants, let alone that they devised

some sort of plan. Plaintiff’s fraud claim thus fails as well.

CONCLUSION

For the foregoing reasons, Defendant Bank Leumi USA’s (Dkt.

26) Motion to Dismiss is GRANTED. The Clerk of Court is respect-

fully DIRECTED to terminate Bank Leumi USA as a Defendant in

this action.

SO ORDERED.

Dated: Brooklyn, New York

July 23, 2020

_/s/ Nicholas G. Garaufis_

NICHOLAS G. GARAUFIS

United States District Judge