Ocean Rig Asa v. Safra Nat. Bank of New York, 99 Civ. 1434(SAS).
| Decision Date | 14 July 1999 |
| Docket Number | No. 99 Civ. 1434(SAS).,99 Civ. 1434(SAS). |
| Citation | 72 F.Supp.2d 193 |
| Parties | OCEAN RIG ASA, Plaintiff, v. SAFRA NATIONAL BANK OF NEW YORK, Defendant. |
| Court | U.S. District Court — Southern District of New York |
Jack A. Greenbaum, Healy & Baillie, LLP, New York City, for plaintiff.
Danforth Newcomb, Daniel D. Edelman, Laurie R. Blank, Shearman & Sterling, New York City, for defendant.
Plaintiff Ocean Rig ASA ("Ocean Rig") seeks redress for the allegedly wrongful dishonor by Defendant Safra National Bank of New York ("Safra") of a standby letter of credit in the amount of $15,000,000. Defendant moves to dismiss all of Plaintiff's claims under Fed.R.Civ.P. 12(b)(6) or, in the alternative, moves for summary judgment pursuant to Rule 56.
Ocean Rig cross-moves for summary judgment on three of its six causes of action. For purposes of summary judgment Ocean Rig and Safra stipulate to all material issues of fact. See Plaintiff's Statement Pursuant to Local Rule 56.1(a) ("Pl.56.1"); Defendant's Statement Pursuant to Local Rule 56.1(a) ("Def.56.1").
For the reasons that follow, Defendant's motions to dismiss and for summary judgment are denied, and Plaintiff's motion for summary judgment on its third and fourth causes of action is granted.
This Court has both federal question and diversity jurisdiction in this case. Federal question jurisdiction arises under the Edge Act as this is a private suit against a federally-chartered commercial bank. See 12 U.S.C. § 632. This Court also has diversity jurisdiction under 28 U.S.C. § 1332, as Defendant is incorporated in New York, Plaintiff is a citizen of a foreign state, and the amount in controversy exceeds $75,000.
Ocean Rig is a Norwegian company, based in Oslo, engaged in the offshore oil drilling business. This corporation's principals, Ocean Rig AS 1 and Ocean Rig AS 2 ("Owners"), each own one offshore drilling rig. See Complaint ("Compl.") ¶¶ 3-4. Owners, desiring to obtain contracts for their drilling rigs, engaged in dealings with Maritima Petroleo e Engenharia Ltda, Rio de Janeiro, Brazil ("Maritima Petroleo").
On November 18, 1998, Owners and Maritima Petroleo agreed that Maritima Petroleo would undertake to secure contracts with third parties for Owners' drilling rigs. See id. ¶ 7. They further agreed that if Maritima Petroleo failed to procure such contracts by 4:00 p.m. Brazilian time on February 5, 1999, Maritima Petroleo would compensate Owners $15,000,000. See id. ¶ 8; Affidavit of Christian Huseby, President of Ocean Rig, dated April 15, 1999, ¶ 3 ("Huseby Aff"). Maritima Petroleo further agreed to provide security for its $15,000,000 obligation to Owners by procuring a Standby Letter of Credit in that amount in favor of the Owners. See Compl. ¶ 8; Plaintiff's Notice of Cross Motion for Summary Judgment ("Pl.'s Not."), Exh. 1, Agreement for Provision of Standby Letter of Credit, dated November 18, 1998 ("Agreement"). Finally, the parties agreed on the choice of law governing the Standby Letter of Credit.1 See Pl.'s Not., Exh. 3, Standby Letter of Credit No. S-0612, dated November 19, 1998 ("LOC No. S-0612").
The Agreement specified that if Maritima Petroleo failed to secure the third-party contracts by February 5, Owners could present a "demand letter" and the Standby Letter of Credit to the issuing bank, Safra. See Pl.'s Not., Exh. 1, Agreement, at ¶ 1.4. The Standby Letter of Credit and Demand Letter could be presented by Ocean Rig, transmitted via Chase Manhattan Bank, within a three day window — no earlier than 9:00 a.m. New York time on February 8, 1999 and no later than 4:00 p.m. New York time on February 11, 1999. See Pl.'s Not., Exh. 3, LOC No. S-0612, ¶¶ 6-7. Additionally, the Standby Letter of Credit set forth the number of signatures required on the Demand Letter, the acceptable signatories from Ocean Rig, and the requirements for validation of the signatures. See id. ¶ 2.
On November 18, 1998, the same day as the execution of the Agreement, Maritima Petroleo caused its affiliate Maritima Overseas, Inc., of Tortola, British Virgin Islands ("Maritima Overseas"), to apply for the Standby Letter of Credit.
Owners, in turn, assigned their agent, Ocean Rig, as their beneficiary of the Standby Letter of Credit. See Pl.'s Not., Exh. 5, Letter from Ocean Rig to Maritima, dated November 23, 1998. Maritima Petroleo acknowledged to Ocean Rig in writing that the Standby Letter of Credit named Ocean Rig as the beneficiary on behalf of Owners; Ocean Rig accepted its assignation as beneficiary. See id. On November 19, Maritima Overseas applied to Safra, for the Standby Letter of Credit. Bernhard Haukali, Norwegian counsel for Ocean Rig, sent Safra a draft "form" of the proposed standby letter of credit. See Pl.'s Not., Appendix to Exh. 2, Ocean Rig Draft LOC ("Draft LOC"). This draft was received by Safra's employee, Jose Da Fonseca, who modified and finalized it. See Affidavit of Jose Da Fonseca, April 28, 1999, ¶ 2 ("Fonseca April Aff."). Safra issued the letter, LOC No. S-0612, on November 19, 1998. See Pl.'s Not., Exh. 3., LOC No. S-0612.
This original letter specified, erroneously, that the Standby Letter of Credit would be drawn on the account of Maritima Petroleo; it did not reflect the assignation of liability to Maritima Overseas. See id. ¶ 1. Maritima Petroleo and Safra then sought to amend letter No. S-0612 to reflect that the $15,000,000 would be drawable on the account of Maritima Overseas. Maritima Petroleo and Safra contacted Ocean Rig to apprise it of the need for this amendment. The amendment issued by Safra on November 30, 1998, and accepted by Ocean Rig (see Fonseca April Aff., Exh. C, Ocean Rig fax to Safra, dated January 8, 1999, confirming acceptance), reads:
WE HEREBY AMEND THIS STANDBY LETTER OF CREDIT AS FOLLOWS:
1-WHERE IT READS MARITIMA PETROLEO E ENGENHARIA LTDA, RIO DE JANEIRO, BRASIL, AMENDED TO READ MARITIMA OVERSEAS INC., TORTOLA, BRITISH VIRGIN ISLANDS.
ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
Compl., Exh. 2., Amendment dated November 30, 1998 ("Amendment") (capitalization, spacing, and emphasis in original.)
By February 5, 1999, Maritima Petroleo had not secured the third-party contracts for Owners, triggering Ocean Rig's right to present the Standby Letter of Credit and Demand Letter to Safra. On February 8, 1999, Tore Valderhaug, CFO of Ocean Rig, and Bernhard Haukali, Counsel for Ocean Rig, flew from Oslo, Norway, to New York, in order to present the Demand Letter ("Demand Letter 1," Compl., Exh. 3), original Standby Letter of Credit No. S-0612, and Amendment to Chase Manhattan Bank. See Affidavit of Bernhard Haukali, April 14, 1999, ¶ 12 ("Haukali Aff."). Chase conveyed the documents to Safra on February 8. See Pl.'s 56.1, ¶ 13. On the morning of February 10, one day before the expiration of the Standby Letter of Credit, the assistant treasurer of Safra, Lucilia Amador, notified Chase that the payment on the letter would be made to Ocean Rig's account on Friday, February 12. See Compl. ¶ 22.
Later that afternoon, Amador notified Chase that payment would not be made due to discrepancies between the materials submitted and the requirements set forth in the Standby Letter of Credit and the Amendment. See Compl. ¶ 23. At 4:35 p.m. on February 10, 1999, Safra sent Chase a Swift telex identifying the errors in the materials submitted by Ocean Rig. See Defendant's Notice of Motion to Dismiss and for Summary Judgment ("Def.'s Not."), Exh. D, "Swift" telex transmission report, February 10, 1998. Safra also called Haukali to inform him that payment would not be made. See Affidavit of Jose Da Fonseca, March 30, 1999 ("Fonseca March Aff."), ¶ 9. This telephone message arrived in Oslo after the close of business on the 10th (see Fonseca April Aff., ¶ 9) and was received by Ocean Rig and its counsel on the 11th. See Compl. ¶ 25.
On February 11, Ocean Rig notified Safra that the discrepancies it identified were, in fact, correct terms used in accordance with the requirements of the original Standby Letter of Credit and Amendment thereto. Nonetheless, Ocean Rig issued a second Demand Letter ("Demand Letter 2," Compl., Exh. 4) with changes aimed at curing the defects protested by Safra. See Compl. ¶ 25. On February 16, five days after the expiration of the Standby Letter of Credit, Fonseca told Ocean Rig's U.S. counsel, Jack Greenbaum, that Demand Letter 2 contained the same defects as Demand Letter 1 and would not be honored. See Compl. ¶ 25.
Safra alleges two discrepancies in Demand Letters 1 and 2:(a) that the Demand Letters did not conform to the Amendment; and (b) that the signature validations on the Demand Letters did not conform to the signature validations clause of the Standby Letter of Credit. Safra contends that the Demand Letters did not correctly incorporate the two changes required by the Amendment. Ocean Rig asserts that the Amendment required a single change, which Demand Letter 1 incorporated. Safra further contends that the signature validation clause of the original Standby Letter of Credit required the signatures of Ocean Rig's principals to be notarized both by way of Apostille2 and validation by a U.S. embassy or consulate ("consularization"). Plaintiff asserts that the original contract provides that Apostille and consularization are alternative methods of validation.
Defendant's motions to dismiss and for summary judgment and Plaintiff's cross-motion for summary judgment are identical in the issues they present. Summary judgment is appropriate as there are no disputed issues of material fact and the issues can be decided as a matter of law. See Pl.'s 56.1; Def.'s 56.1.
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