670 F.2d 8 (2nd Cir. 1982), 601, Sperry Intern. Trade, Inc. v. Government of Israel

Docket Nº:601, Docket 81-7751.
Citation:670 F.2d 8
Party Name:SPERRY INTERNATIONAL TRADE, INC., Petitioner-Appellee, v. GOVERNMENT OF ISRAEL, Respondent-Appellant, GOVERNMENT OF ISRAEL, Third-Party Petitioner-Appellant, v. AMERICAN ARBITRATION ASSOCIATION, Third-Party Respondent-Appellee.
Case Date:January 21, 1982
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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670 F.2d 8 (2nd Cir. 1982)

SPERRY INTERNATIONAL TRADE, INC., Petitioner-Appellee,

v.

GOVERNMENT OF ISRAEL, Respondent-Appellant,

GOVERNMENT OF ISRAEL, Third-Party Petitioner-Appellant,

v.

AMERICAN ARBITRATION ASSOCIATION, Third-Party Respondent-Appellee.

No. 601, Docket 81-7751.

United States Court of Appeals, Second Circuit

January 21, 1982

Argued Dec. 14, 1981.

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Jeffrey A. Fillman, New York City (Morris A. Wirth, Finley, Kumble, Wagner, Heine, Underberg & Casey, New York City, on brief), for respondent, third-party petitioner-appellant Government of Israel.

Norman Solovay, New York City (David R. Foley, Peter C. Kostant, Aron Broches, Holtzmann, Wise & Shepard, New York City, on brief), for petitioner-appellee Sperry Intern. Trade, Inc.

Before TIMBERS, KEARSE and CARDAMONE, Circuit Judges.

KEARSE, Circuit Judge:

Respondent-appellant Government of Israel ("Israel") appeals from an order of the United States District Court for the Southern District of New York, Milton Pollack, Judge, which, inter alia, enjoined Israel from drawing on a standby letter of credit issued in its favor by Citibank, N.A. ("Citibank") on behalf of petitioner-appellee Sperry International Trade, Inc. ("Sperry"), pending an arbitration panel's ruling on Israel's entitlement to draw on said letter. Because Sperry failed to demonstrate any likelihood of irreparable harm, we reverse so much of the district court's order as granted the preliminary injunction. 1

FACTS

The papers submitted by the parties to the district court paint the following picture. In July 1978, Israel and Sperry Rand International Trade, Inc., the predecessor of appellee Sperry (both referred to as "Sperry"), executed a contract (the "Contract") requiring Sperry, over a forty-month period, to carry out "Project 6977," the design and construction of a modern ground-to-ground communication system for the Israeli Air Force. Under P 59 of the Contract, Israel's obligation to make certain payments to Sperry was conditioned on Israel's receipt of an irrevocable letter of credit in its favor. The Contract gave Israel the right to draw on this letter of credit upon presentation of a sight draft and Israel's own "certification that it is entitled to the amount covered by such draft by reason of a clear and substantial breach" of the Contract. (Contract P 59.)

Paragraph 45 of the Contract provided that all Contract disputes that could not be resolved by negotiation were to be submitted to arbitration in accordance with the rules of the American Arbitration Association ("Association"). It required that any such arbitration be conducted in New York City, in the English language, and in accordance with the substantive laws of the State of New York.

In February 1979, Citibank opened its clean irrevocable letter of credit in Israel's favor for $11,847,749. (In August 1979 the

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amount was increased to $15,008,098.) The provision for payment stated:

FUNDS UNDER THIS CREDIT ARE AVAILABLE TO YOU AGAINST YOUR SIGHT DRAFT DRAWN ON US ... PROVIDED SUCH DRAFT IS ACCOMPANIED BY YOUR CERTIFICATION THAT YOU ARE ENTITLED TO THE AMOUNT COVERED BY SUCH DRAFT BY REASON OF NONDELIVERY IN ACCORDANCE WITH CONTRACT NO. 6977 OR BY REASON OF DENIAL OF THE NECESSARY LICENSES.

The credit was effective immediately, and was due to expire on January 13, 1982.

By the summer of 1981, it was clear that Project 6977 was not proceeding according to the parties' expectations, and on August 3, pursuant to P 45 of the Contract, Sperry served on Israel and filed with the Association a Demand for Arbitration, seeking a declaration that Israel had breached its contractual obligations and demanding damages of approximately $10,000,000. 2 Sperry claimed that its attempts to perform its Contract obligations had been seriously and substantially frustrated, hindered, and delayed by the wrongful actions and inactions of Israel. In particular, Sperry claimed that Israel had failed to provide certain equipment, structures, facilities, documentation, information, and services to Sperry as required by the Contract, and that Israel had repeatedly insisted upon patently irrational interpretations of the parties' respective contractual rights and obligations. Israel denied Sperry's allegations and asserted eleven counterclaims, alleging, inter alia, nonperformance of the...

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