stating that because “[no] United States location was designated as the ‘place of performance’ where money was ‘supposed’ to have been paid [to the plaintiffs],” an Iraqi bank’s decision not to honor letters of credit had no direct effect in the United States
How later courts described this case
- stating that because “[no] United States location was designated as the ‘place of performance’ where money was ‘supposed’ to have been paid [to the plaintiffs],” an Iraqi bank’s decision not to honor letters of credit had no direct effect in the United States
- holding that defendant’s failure to honor payment obligations did not cause a' direct effect in the United States because the United States was not designated as the “place of performance” where money was “supposed” to have been paid to the plaintiff
- holding that under Weltover, a foreign sovereign’s breach of contract did not cause a “direct effect” in the United States because no “United States location was designated as the ‘place of performance’ where money was ‘supposed’ to have been paid”
- rejecting argument that there was a sufficient nexus between the Iraqi government bank’s commercial activity carried on in the United States and claim asserted against the bank by several Irish companies, alleging that the bank had failed to make payments under a letter of credit, even though the bank had made previous payments from accounts the Iraqi bank had in the United States
Written by the judges who cited it.
The opinion
WALD, Circuit Judge,
concurring:
My colleagues base their finding that Rafi-dain’s failure to honor Goodman’s letters of credit had no “direct effect” in the United States in part on the fact that “[njeither New York nor any other United States location was designated as the ‘place of performance’ where money was ‘supposed’ to have been paid by Rafidain or Goodman.” Majority Opinion (“Maj.Op.”) at 1146. I write separately to emphasize that, for an act to have a “direct effect” in the United States, there is no prerequisite that the United States be contractually designated as the place of performance. If, for example, the letters of credit had specified that money must be fun-nelled to Ireland through the United States, a breach of the letters of credit would have had an “immediate consequence” in the United States: money that would have been transferred to Ireland would have remained in New York accounts. Cf. Republic of Argentina v. Weltover, — U.S. -, -, 112 S.Ct. 2160, 2168 , 119 L.Ed.2d 394 (1992) (finding direct effect where “money that was supposed to have been delivered to a New York bank for deposit was not forthcoming”). Moreover, even absent a contractual provision mandating the involvement of U.S. banks, if the longstanding consistent customary practice between Rafidain and Goodman had been for Rafidain to pay Goodman from its New York accounts, the breach of the letters of credit might well have had a direct and immediate consequence in the United States. As the majority points out, see Maj. Op. at 1147 n. 3, however, Goodman’s complaint failed to allege such a longstanding and consistent practice; the complaint claims only that “[i]n the past, Rafidain has used ... funds on deposit at U.S. banks to effect payment to plaintiff Goodman Holdings in the United States on one or more of the letters of credit at issue in this action.” Complaint ¶ 6. Thus I agree with my colleagues that in this case there was no direct effect in the United States -within the meaning of 28 U.S.C. § 1605 (a)(2), but I am uncomfortable with the reliance in their rationale on the lack of New York as a contractually designated place of performance.