Shin-Etsu Chemical Co. v. Icici Bank Ltd.

• Decision Date: 18 May 2004
• Docket Number: 3033.
• Citation: 2004 NY Slip Op 03959,9 A.D.3d 171,777 N.Y.S.2d 69
• Parties: SHIN-ETSU CHEMICAL CO., LTD., Respondent, v. ICICI BANK LIMITED, Appellant.
• Court: New York Supreme Court — Appellate Division

9 A.D.3d 171

777 N.Y.S.2d 69

2004 NY Slip Op 03959

SHIN-ETSU CHEMICAL CO., LTD., Respondent, v. ICICI BANK LIMITED, Appellant.

3033.

Appellate Division of the Supreme Court of the State of New York, First Department.

May 18, 2004.

APPEAL from an order of the Supreme Court, New York County (Ira Gammerman, J.), entered August 11, 2003. The order denied defendant's motion to dismiss the complaint for forum non conveniens and granted plaintiff's cross motion for summary judgment.

Kelley Drye & Warren LLP (Jonathan K. Cooperman and Robert I. Steiner of counsel), for appellant.

Jones Day (Mark S. Mandel and Jennifer W. Cohen of counsel), for respondent.

OPINION OF THE COURT

SULLIVAN, J.

This appeal presents the issue of whether Supreme Court, in denying a motion to dismiss on the ground of forum non conveniens, applied the proper standard, where neither party is a New York resident or domiciliary and none of the events giving rise to the lawsuit—an action against the issuer of a letter of credit for payment—occurred in New York, or even in the United States for that matter. Plaintiff is a Japanese corporation with its principal place of business in Tokyo. Defendant ICICI Bank Limited is an Indian banking institution with its principal place of business in India.

On or about November 18, 2000, plaintiff, a manufacturer of preform for fiber optic cable, entered into a long term sale and purchase agreement (five years) with Aksh Optifibre Limited, a nonparty Indian corporation engaged in the manufacture of fiber optic cable, with its principal place of business in Rajastan, India, to sell to Aksh 3000 kilograms of preform per month. The contract provided "[Aksh] shall notify [plaintiff] of the nominated carrier for the next month's shipment by the 15th day of the current month. If [Aksh] fails to notify [plaintiff] by such date, [plaintiff] may, at its sole discretion, select and nominate the carrier." The agreement required that payment be made through a revolving letter of credit, which, at the request of Aksh, ICICI issued on or about February 7, 2001 through its New Delhi branch. ICICI was not a party to the sales and purchase agreement.

Under the irrevocable letter of credit, ICICI was to pay plaintiff upon the presentation, in India, of conforming documents including, inter alia, a signed commercial invoice, a certificate showing that the goods were of Japanese origin and an airway bill issued by "M/S. MSAS Global Logistics K.K." Of the required conforming documents, only the airway bill is at issue. Aksh, through notices issued by the Bank of New York's Tokyo branch, had the letter of credit subsequently amended at least 10 times, one of which changed the airway carrier from Global Logistics to Exel Japan Ltd. At plaintiff's request, Aksh again had the letter of credit amended on October 20, 2001 to provide that the airway bill be issued by "Exel Japan Limited, or its successor, if any." The word "successor" was added because the prior freight forwarder, M/S Global Logistics, merged with Exel. As a result, Aksh advised ICICI to amend the letter of credit to account for any other future mergers or asset sales.

At some point prior to July 10, 2002, Exel informed plaintiff that Aksh had notified it not to accept cargoes of preform pending further notice. On that date, plaintiff, the beneficiary under the letter of credit, faxed a letter to ICICI, advising it of a dispute it was having with Aksh, which, according to the letter, informed Exel, the nominated freight forwarder under the letter of credit, not to accept plaintiff's cargos of preform for shipment. As a result, plaintiff advised ICICI it intended to appoint a new freight forwarder, Unitrans, "as the successor freight forwarder in accordance with the terms of the referenced Letter of Credit and the underlying Long Term Sale and Purchase Agreement between [plaintiff] and AKSH." The letter further advised, "We expect ICICI . . . to honor a presentation under the Letter of Credit for such shipment [which] will occur on July 14, 2002. Please contact the undersigned immediately if you have any questions concerning this matter. Otherwise we will expect prompt payment upon presentation of the documents required under the Letter of Credit." An ICICI representative in New Delhi responded that plaintiff should take the matter of its appointment of Unitrans up with Aksh and that it would not accept a nomination that departed from the terms of the letter of credit. As the record shows, Unitrans was a different freight forwarder with no relationship to Exel.

ICICI contacted Aksh to ascertain whether it consented to payment if a discrepant shipper were named. Aksh would not consent. On July 31, 2002, plaintiff forwarded an airway bill to ICICI from Unitrans, signed by an unidentified individual whose signature was preceded by the typewritten words, "Unitrans Ltd. as agent of Air India Ltd., carrier and as successor of Exel Japan Limited." Since Aksh would not approve the discrepancy, ICICI notified plaintiff that it would be unable to make payment, pointing out that the airway bill was to be "issued by M/S Exel Japan Ltd. However, the same has been issued by Unitrans Ltd." In response, plaintiff renewed its demand for payment, claiming it had the right to appoint a successor to Exel.

After informal efforts to resolve the dispute proved unsuccessful, plaintiff commenced this action in Supreme Court, New York County. ICICI answered, asserting a general denial and various affirmative defenses, but not that of fraud. ICICI thereafter moved to dismiss on the ground of forum non conveniens, pointing out that all the documents relating to the letter of credit were kept at its New Delhi branch, that it takes 20 to 22 hours to fly from New Delhi to New York and that the determination to reject plaintiff's submission of documents was made in India. ICICI also tendered the affidavit of Aziz Mushabber Ahmadi, a former Chief Justice of India, explaining that India provides an adequate alternative forum. Ahmadi stated that the Indian Code of Civil Procedure had been amended in 1999 and 2002 in order to expedite the resolution of commercial matters. He expressed the opinion that Indian courts could dispose of a commercial case within a year.

In opposition, plaintiff submitted the affidavit of Bhupinder Nath Kirpal, also a former Chief Justice of India, who was of the opinion that, because of the huge backlog of existing cases, the fact that no preference is given to commercial cases or post-amendment cases and the shortage of judges, it would take the Delhi High Court at least 10 years to decide a case such as this. Plaintiff also cross-moved for summary judgment.

In reply, ICICI submitted another affidavit from Ahmadi, who, not surprisingly, disagreed with Kirpal, stating, "It is essentially the non-commercial causes . . . which get prolonged and which clog the calendar of cases"; implying that commercial cases can be "taken out of the queue" and "put on the fast track" and noting that, in his experience as a trial judge, most commercial cases were disposed of expeditiously. As he stated, "Even under the pre-amendment scenario, letter of credit disputes could end within a year, latest three years, if both parties consented to an early hearing." The shortage of judges, he noted, did not apply at the High Court level, where this suit would be handled.

In opposition to plaintiff's cross motion for summary judgment, ICICI submitted the affidavit of the chief manager of its New Delhi branch, who stated that in the banking industry the term "successor," when used in the context of a corporation, means "a company that subsumes another company as a result of a change in ownership or a transfer of corporate assets" and that Unitrans did not fit within this definition. ICICI submitted Indian precedent to support its interpretation of "successor."

In reply, plaintiff submitted another affidavit from Kirpal, distinguishing ICICI's precedents and stating that the term "successor" has various meanings in Indian law, depending on its use. Kirpal noted, "I have not located a single case where the term `successor' has been used in the context of a banking transaction . . . similar to the kind in the present dispute, wherein the term `successor' has been interpreted in the manner set forth by [ICICI]."

On April 7, 2003, some 3½ months after it had answered, ICICI moved to amend its answer to add the affirmative defense of fraud, asserting that plaintiff presented an airway bill deliberately misrepresenting that Unitrans Ltd. was the successor to Exel Japan Ltd.

Supreme Court denied ICICI's motion to dismiss, primarily because of the delays in the Indian court system. Acknowledging that the cause of action did not arise in New York, the court gave deference to plaintiff's choice of forum and noted the competence of New York courts to handle litigation involving letters of credit. It also found a sufficient nexus between ICICI and New York, presumably because ICICI's shares were traded on the New York Stock Exchange. The court rejected ICICI's argument that proceeding with the case in New York would impose a burden on witnesses. It also granted plaintiff's cross motion for summary judgment as to liability, finding that plaintiff's documents were conforming. In so ruling, it looked to the agreement between plaintiff and Aksh, not the letter of credit to which ICICI was a party, and found that, based on Aksh's failure to nominate a carrier by the 15th day of the preceding month, the agreement allowed plaintiff to appoint a freight forwarder other than Exel, which, the court determined, was the reason for the use of the word "successor" in the letter of credit. Thus, the court held, the word "successor" did not mean a legal successor. Finally, the court denied ICICI's motion to amend its answer. Forum non conveniens dismissal should have been granted.

While the disposition of a ...