Moog World Trade Corp. v. Bancomer, S.A.

• Decision Date: 30 July 1996
• Docket Number: No. 95-2959,95-2959
• Parties: 30 UCC Rep.Serv.2d 297 MOOG WORLD TRADE CORPORATION, Plaintiff--Appellant, v. BANCOMER, S.A.; Boatmen's National Bank of St. Louis, Defendants--Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1382

90 F.3d 1382

30 UCC Rep.Serv.2d 297

MOOG WORLD TRADE CORPORATION, Plaintiff--Appellant, v. BANCOMER, S.A.; Boatmen's National Bank of St. Louis Defendants--Appellees.

No. 95-2959.

United States Court of Appeals Eighth Circuit.

Submitted Feb. 16, 1996.

Decided July 30, 1996.

Adrian Philipp Sulser, St. Louis, MO, argued (Stefan J. Glynias, on the brief), for appellant.

Kevin M. Fong, San Francisco, CA, argued (Robert A. Gutkin, San Francisco, CA, and Steven Schwartz, St. Louis, MO, on the brief), for appellee.

Before LOKEN, BRIGHT, and MORRIS SHEPPARD ARNOLD, Circuit Judges.

LOKEN, Circuit Judge.

This case requires us to apply the familiar due process limitation on personal jurisdiction to the rather unfamiliar realities of financing international trade. Moog World Trade Corp. ("Moog") agreed to sell automobile parts to its customer in Mexico, Commercializadora de Refacciones en Generales S.A. ("CRG"). To finance this purchase, CRG had its Mexican bank, Bancomer, S.A., issue an irrevocable commercial letter of credit naming Moog as beneficiary. When Moog's draw under the letter of credit was dishonored by Boatmen's National Bank, the Missouri confirming bank, Moog sued Boatmen's and Bancomer. The district court ¹ dismissed Bancomer for lack of personal jurisdiction, and Moog appeals that ruling. We affirm.

I.

Bancomer issued the letter of credit in August 1992 at the request of its customer, CRG. The letter of credit promised that Moog as beneficiary would be paid $383,636 at Boatmen's offices in St. Louis upon Moog's timely presentation of a sixty-day time draft accompanied by specified documents confirming that Moog had shipped the auto parts to CRG. Bancomer issued the letter of credit by a tested telex to Boatmen's. Boatmen's then sent the letter of credit to Moog, with a cover letter explaining:

We enclose herewith an authenticated irrevocable letter of credit opened in your favor by [Bancomer].

* * * * * *

Drafts are to be drawn on the Boatmen's National Bank of St. Louis, St. Louis, Missouri.

* * * * * *

We [Boatmen's] add our confirmation to the issuing bank's letter of credit and engage with you that draft(s) and/or documents drawn under and in compliance with the terms of this credit will be duly honored. ²

Two weeks before the letter of credit expired, Moog presented a draft and supporting documents to Boatmen's, which dishonored the draw, noting discrepancies between the shipping documents and the letter of credit's specifications. Moog had time to cure these discrepancies by submitting amended documents to Boatmen's. Instead, Moog instructed Boatmen's to present the dishonored documents to Bancomer in Mexico. When Bancomer refused to honor the draw, citing six alleged documentary discrepancies, a Moog representative and its attorney visited Bancomer's office in Guadalajara, Mexico, requesting an explanation of the dishonor. Bancomer responded that Moog should contact Boatmen's.

With the letter of credit now expired, Moog brought this diversity action, claiming wrongful dishonor and untimely notice of dishonor by both banks. The district court dismissed Bancomer for lack of personal jurisdiction and dismissed the untimely-notice-of-dishonor claim against Boatmen's on the merits. Moog dismissed its wrongful dishonor claim against Boatmen's without prejudice and appealed the district court's rulings. Moog later dismissed its appeal against Boatmen's, leaving for us only the question whether the district court has personal jurisdiction over Bancomer.

"Once a defendant has challenged a federal court's jurisdiction, the plaintiff bears the burden of proving that jurisdiction exists." Falkirk Mining Co. v. Japan Steel Works, Ltd., 906 F.2d 369, 373 (8th Cir.1990). Bancomer challenged the district court's jurisdiction, submitting uncontroverted evidence that it has no office, employee, or property in Missouri; is not qualified to do business in Missouri; pays no Missouri taxes; and transacts no other business in Missouri. Moog responded by submitting uncontroverted evidence that, in the two years prior to August 1992, Bancomer issued thirty-six letters of credit in favor of Missouri beneficiaries, in the total amount of $4.7 million, including four prior letters of credit at the request of CRG for the benefit of Moog in amounts of $100,000, $200,000, $250,000, and $389,000. Because the record does not reflect the status of the transaction between Moog and CRG underlying the letter of credit, and because the letter of credit is independent of that underlying transaction, the personal jurisdiction issue turns entirely upon the letter of credit facts of record. We review this jurisdiction issue de novo. See General Elec. Capital Corp. v. Grossman, 991 F.2d 1376, 1387 (8th Cir.1993).

II.

The federal court in a diversity case must determine whether defendant is subject to the court's jurisdiction under the state long arm statute, and if so, whether exercise of that jurisdiction comports with due process. As pertinent here, the Missouri long arm statute confers jurisdiction over "any cause of action arising from ... (1) [t]he transaction of any business within this state [or] (2) [t]he making of any contract within this state." Mo. Ann. Stat. § 506.500.1. Missouri courts have construed this statute "to extend the jurisdiction of the courts of this state over nonresident defendants to the extent permissible under the Due Process Clause." State ex rel. Deere & Co. v. Pinnell, 454 S.W.2d 889, 892 (Mo. banc 1970). Jurisdiction must be based upon "the act or conduct set forth in the statute" (as opposed to conduct not encompassed by the statute that might otherwise be a permissible basis for jurisdiction), and the cause of action must arise from the nonresident defendant's activities in Missouri. Scullin Steel Co. v. National Ry. Utilization Corp., 676 F.2d 309, 312 (8th Cir.1982).

Though it is often difficult to apply, the governing due process standard is well-established in this circuit:

The due process clause requires there be "minimum contacts" between the defendant and the forum state before the forum state may exercise jurisdiction over the defendant. World-Wide Volkswagen v. Woodson, 444 U.S. 286, 291 [100 S.Ct. 559, 564, 62 L.Ed.2d 490] (1980). Sufficient contacts exist when "the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there," id. at 297 , and when "maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.' " International Shoe Co. v. Washington, 326 U.S. 310, 316 [66 S.Ct. 154, 158, 90 L.Ed. 95] (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 [61 S.Ct. 339, 343, 85 L.Ed. 278] (1940)). In assessing the defendant's "reasonable anticipation," there must be " 'some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.' " Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 [105 S.Ct. 2174, 2183-84, 85 L.Ed.2d 528] (1985) (quoting Hanson v. Denckla, 357 U.S. 235, 253 [78 S.Ct. 1228, 1239-40, 2 L.Ed.2d 1283] (1958)).

General Electric, 991 F.2d at 1387, quoting Soo Line R.R. v. Hawker Siddeley Can., Inc., 950 F.2d 526, 528-29 (8th Cir.1991). To put the issues of fair play, reasonable anticipation, and purposeful availing in proper perspective, we must examine the purposes and functioning of an international commercial letter of credit.

Letters of credit have been used for nearly 3000 years. Though they stretch common law contract principles such as consideration, letters of credit were eventually accepted and enforced by Anglo-American common law courts. See Rufus J. Trimble, The Law Merchant and the Letter of Credit, 61 Harv. L.Rev. 981, 983-88 (1948). In the present-day United States, letter of credit principles have been codified in Article 5 of the uniform commercial code, which is generally consistent with the internationally promulgated UCP.

The commercial letter of credit is widely used to assist sales transactions, including international export/import transactions. The parties to such a transaction have conflicting needs and concerns. The exporter-seller does not wish to part with its goods without knowing it will be paid, even if the buyer later changes its mind, becomes insolvent, or claims upon inspection that the goods are non-conforming. The seller also wants prompt payment in its own currency, even if the buyer needs credit financing. The importer-buyer, on the other hand, may need credit financing and in any event does not wish to pay for the goods without firm evidence that they have been shipped. Each party typically fears litigation in the other party's "home court."

The commercial letter of credit bridges these differences. The buyer's bank issues the letter of credit naming the seller as beneficiary. The letter of credit is the issuer's irrevocable obligation to pay a stated amount of money to the seller-beneficiary, at a stated time and place and in a specified currency. To obtain payment, the seller must present specified documents, typically, the seller's invoice and shipping documents, thereby confirming to the buyer that (i) the right goods (ii) are in the hands of a common carrier (iii) with the agreed-upon costs prepaid. The letter of credit usually requires the issuing bank to honor or dishonor the seller's presentation (draw) while the goods are in transit. If the bank dishonors, it must return the shipping documents to the seller, who then has the exclusive right to claim the goods from the carrier. If the draw is honored, the seller is promptly paid, or in a credit sale is promised payment at a specified time by the credit-worthy issuing bank, a promise the seller can convert to immediate cash by discounting. See generally Burton V. McCullough, Letters of Credit §§ 1.03-1.04 (1995).

This...