First Union Nat. Bank v. Paribas

• Decision Date: 29 March 2001
• Docket Number: No. 00 Civ. 5401(LAK).,No. 00 Civ. 5398(LAK).,No. 00 Civ. 5400(LAK).,No. 00 Civ. 5397(LAK).,00 Civ. 5397(LAK).,00 Civ. 5398(LAK).,00 Civ. 5400(LAK).,00 Civ. 5401(LAK).
• Citation: 135 F.Supp.2d 443
• Parties: FIRST UNION NATIONAL BANK, Plaintiff, v. PARIBAS, f/k/a Banque Paribas, Defendant. First Union National Bank, Plaintiff, v. Anz Grindlays Bank, Defendant. First Union National Bank, Plaintiff, v. Emirates Bank International, Defendant. First Union National Bank, Plaintiff, v. Arab African International Bank, Defendant.
• Court: U.S. District Court — Southern District of New York

135 F.Supp.2d 443

FIRST UNION NATIONAL BANK, Plaintiff, v. PARIBAS, f/k/a Banque Paribas, Defendant.

First Union National Bank, Plaintiff, v. Anz Grindlays Bank, Defendant.

First Union National Bank, Plaintiff, v. Emirates Bank International, Defendant.

First Union National Bank, Plaintiff, v. Arab African International Bank, Defendant.

No. 00 Civ. 5397(LAK).

No. 00 Civ. 5398(LAK).

No. 00 Civ. 5400(LAK).

No. 00 Civ. 5401(LAK).

United States District Court, S.D. New York.

March 29, 2001.

Lawrence E. Miller, Mark L. LoSacco, LeBoeuf, Lamb, Greene & MacRae, LLP, New York City, for Plaintiff.

Martin Domb, John F. Keating, Jr., Hill, Betts & Nash LLP, New York City, for Defendants BNP Paribas, ANZ Grindlays Bank and Emirates Bank International.

David W. Rivkin, Suzanne M. Grosso, Debevoise & Plimpton, New York City, for Defendant Arab African International Bank.

MEMORANDUM OPINION

KAPLAN, District Judge.

These cases have their origins in what appears to have been a massive fraudulent scheme perpetrated in London that now is under investigation by the Serious Fraud Office of the London police, has resulted in a number of arrests, and has led to extensive litigation there.

The essence of the scheme appears to have been as follows: A Middle Eastern corporation known as Solo Industries Limited ("Solo") applied to many banks, chiefly located in the Middle East, for deferred payment letters of credit ("LCs") in favor of a U.K. based company, Simetal Limited ("Simetal"), ostensibly to finance Solo's purchase of high value non-ferrous metals and alloys from Simetal. Banks located in London, including plaintiff's London branch, confirmed the LCs. Simetal then presented the required documents to the London confirming banks in advance of the maturity dates of the LCs. Many — including the plaintiff's London branch — discounted the letters, evidently in reliance on the obligations of the issuing banks to pay the full amounts of the letters upon their maturity, and made substantial payments to Simetal.

In the spring of 1999, Solo collapsed, leaving more than 20 banks, including the defendants here, facing losses aggregating more than $300 million—assuming that they are liable to plaintiff and the other confirming banks. The Court is advised, however, that evidence has been developed that suggests that bills of lading and other documents presented by Simetal to plaintiff and presumably other confirming banks were fraudulent in that they misstated the quality and quantity of the goods actually shipped. A number of issuing banks, including the defendants in this case, dispute their liability to the confirming banks on the basis that the confirming banks knew of or deliberately turned a blind eye toward the fraudulent activity before they discounted the LCs and therefore have no claims against the issuing banks.

There has been extensive activity in London concerning this situation for almost two years. Indeed, until shortly before these actions were commenced, it was assumed among the English counsel for these parties that this litigation would be brought in London. On February 25, 2000, however, the English Court of Appeal decided Banco Santander, S.A. v. Banque Paribas,¹ in which it held that a confirming bank that discounts a deferred payment letter of credit in advance of maturity becomes the assignee of the claim of the beneficiary against the issuing bank and therefore is subject to whatever defenses the issuer may have against the beneficiary. This suggests that the issuing banks would be entitled to assert Simetal's alleged fraud as a defense to the claims of the confirming banks with respect to the LCs. In consequence, plaintiff rapidly shifted ground and brought these actions in New York, where it argues that New York law should govern and seeks to avoid the impact of the Banco Santander case. Defendants move to dismiss on the ground, among others, of forum non conveniens.

I

The essentials of the dispute already have been outlined. It remains to sketch in somewhat greater detail the facts pertinent to resolution of the forum non conveniens issue.

A. Parties

Plaintiff First Union National Bank is a national bank headquartered in Charlotte, North Carolina. It does business, however, all over the world and has a branch office in London. Almost all of its personnel involved in the matters at issue are in the United Kingdom.

Defendants all are banks organized under the laws of foreign nations other than the United Kingdom.

B. The Letters of Credit

In March and April 1999, the Sharjah and Dubai branches of the defendant banks issued dollar-denominated, deferred payment LCs² at the request of Solo and M/S Zeeba Metal Company, Inc., both companies owned by one Madjeb Patel. The letters ostensibly were issued to finance purchases of metals of Russian origin from Simetal. Accordingly, Simetal was named as the beneficiary on each. Each of the LCs was addressed to, and provided that it was available with, plaintiff's London branch ("FUNB-London"). Each provided for payment 180 days after the presentation of documents. Some requested and others permitted confirmation by FUNB-London, and FUNB-London confirmed all of them. Each authorized FUNB-London to obtain reimbursement by drawing dollars from the issuer's account at a New York City bank.³

Shortly after the issuance of each LC, Simetal presented to FUNB-London the bills of lading and other documents required by it. In each case, FUNB-London forwarded the documents to the issuer with a cover letter stating that the presentation of documents complied with the LC and that FUNB-London intended to claim reimbursement on the maturity date, i.e., 180 days after Simetal's presentation of the documents to FUNB-London.⁴ According to FUNB-London, however, it "transferred or otherwise credited to Simetal" a discounted amount on the same day that it forwarded the documents to the issuer. Thus, although FUNB-London neither was obligated to nor requested by the issuer to pay Simetal until the maturity date, FUNB-London voluntarily chose to discount each drawing by paying or crediting to Simetal's account a discounted amount. According to defendants, moreover, FUNB-London did not notify the issuers that it had done so.

II

The analysis of forum non conveniens motions requires consideration of whether there is an adequate alternative forum⁵ and, if so, a balancing of "a series of private and public interests in determining whether to retain the case or dismiss it in favor of [the] alternative forum."⁶

A. Private Interest Factors

No one disputes that England is an adequate alternative forum.⁷ The Court therefore turns to the so-called "private interest factors," first among them being the oft-stated principle that a plaintiff's choice of forum is entitled to substantial deference and should not be disturbed lightly.⁸

1. Plaintiff's Choice of Forum

The parties here join issue with respect to the degree of deference that should be accorded to plaintiff's choice of this forum. Defendants acknowledge that substantial weight ordinarily is due to a plaintiff's choice of forum. They acknowledge, of course, that plaintiff is a United States citizen, and they do not seriously dispute that even greater deference usually must be shown to the choice of a U.S. forum by such a plaintiff.⁹ But they argue that the weight to be accorded to this plaintiff's choice of this forum is undercut by the fact that this case concerns exclusively the operations of plaintiff's London branch relating to business having no substantial contact with the United States. It cites, among other cases, Sussman v. Bank of Israel for the proposition that the weight accorded to "citizenship as a talisman against forum non conveniens dismissal is diminished" where the plaintiff "chooses to invest in a foreign country and then complains of fraudulent acts occurring primarily in that country."¹⁰ Plaintiff rejoins that an American citizen rarely should be denied access to American courts under the doctrine of forum non conveniens and asserts that this is even more clearly true where, as it claims is the case here, the wrong complained of — the non-payment of the defendants by plaintiff — occurred in New York. There is much to be said for the positions of both sides on this issue.

Plaintiff certainly is right in saying that a U.S. forum should not lightly be denied to a U.S. citizen on the basis of forum non conveniens. Indeed, "[f]or generations it had been the inflexible New York rule that if any party to the lawsuit was a New York resident, the doctrine of forum non conveniens was inapplicable."¹¹ But that no longer is the law of New York,¹² and it most assuredly is not the law applicable in federal courts.¹³ Hence while the citizenship of the plaintiff is important, it is not dispositive.

Defendants, on the other hand, surely are right in saying that there is little sense to allowing a U.S. citizen to haul a group of foreign defendants into a U.S. court on transactions having little or nothing to do with this country where there is an available foreign forum significantly better suited to handling the litigation in a prompt, efficient and effective manner. As the Second Circuit only recently reminded, the deference due to the choice of a U.S. forum by a U.S. plaintiff is not attributable to "chauvinism or bias in favor of U.S. residents."¹⁴ Rather, it reflects the fact that "the greater the plaintiff's ties to the plaintiff's chosen forum, the more likely it is that the plaintiff would be inconvenienced by a requirement to bring the claim in a foreign jurisdiction."¹⁵

In the last analysis, it always must be borne in mind that there is no algorithm that assigns precise weights to the factors that inform forum non conveniens determinations. The doctrine instead is intensely practical and fact-bound. The most that may be said is that courts reach informed judgments after considering all of the pertinent...