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Export-Import Bank of the United States v. United California Discount Corp.

August 31, 2010

EXPORT-IMPORT BANK OF THE UNITED STATES PLAINTIFFS,
v.
UNITED CALIFORNIA DISCOUNT CORP. DBA UNITED NEVADA TRADE INTERNATIONAL, DBA UNITED CALIFORNIA FACTORS, AND DBA UNITED CALIFORNIA TRADE FINANCE DEFENDANTS.



The opinion of the court was delivered by: Christina A. Snyder United States District Judge

I. INTRODUCTION

ORDER GRANTING IN PART AND DENYING IN PART CROSS-MOTIONS FOR SUMMARY JUDGMENT (filed July 16, 2010 and July 30, 2010)

On April 27, 2009, plaintiff Export-Import Bank of the United States ("Ex-Im") filed the instant action against defendant United California Discount Corp. dba United Nevada Trade International, dba United California Factors, and dba United California Trade Finance ("UCDC") alleging claims for: (1) wrongful dishonor of standby letters of credit; (2) breach of contract; and (3) unjust enrichment.

On July 16, 2010 and July 30, 2010, defendant and plaintiff respectively filed the instant cross-motions for summary judgment. On July 26, 2010 and August 9, 2010, the parties filed their oppositions. On August 2, 2010 and August 16, 2010, the parties filed their replies. A hearing was held on August 30, 2010, and the motion was taken under submission. After carefully considering the arguments set forth by both parties, the Court finds and concludes as follows.

II. BACKGROUND

Plaintiff is a corporation organized and existing under federal law as an agency of the United States of America created pursuant to 12 U.S.C. § 635. Ex-Im's Statement of Uncontroverted Facts ("ESUF") ¶ 1. Defendant is a California corporation with its principal place of business in Redondo Beach in Los Angeles County. Complaint ¶ 4.

Plaintiff is the official export credit agency of the United States, and it offers various financial products, including working capital loan guarantees. ESUF ¶¶ 1--2. Under its working capital guarantee program, plaintiff guarantees loans made by private commercial lenders to U.S. exporters to facilitate the export of goods or services. ESUF ¶ 2. Should the exporter default, the guaranteed lender can file a claim with plaintiff for payment under the guarantee. ESUF ¶¶ 2--3. Plaintiff then pays the private lender under the terms of the guarantee, and the lender assigns its rights to the debt to plaintiff. ESUF ¶ 3.

This suit involves a transaction approved under the working capital guarantee program for UPS Capital Business Credit f/k/a/ First International Bank ("UPS") to provide a loan to Ashford International, Inc. ("Ashford"), an American company based in Atlanta, Georgia, in support of a contract for the sale of computers and related services with the Ministry of Education ("MOE") of the Kingdom of Jordan. ESUF ¶ 4. On or about January 27, 2000, Ashford entered into a credit agreement with UPS whereby UPS agreed to extend a revolving line of credit to Ashford of up to $3 million. ESUF ¶ 5. Ashford also executed an Export Revolving Loan Promissory Note (the "Note") and a Corporate Guaranty in favor of UPS. ESUF ¶ 5.

Sometime thereafter, UPS commenced loan work-out procedures with Ashford, in consultation with plaintiff.*fn1 ESUF ¶ 7. As part of the restructuring, UPS issued two standby letters of credit (the "UPS LOCs") to support Ashford's contract with the MOE. ESUF ¶ 7. As a condition of UPS issuing the UPS LOCs, Ashford was required to obtain two standby letters of credit for the benefit of UPS in amounts at least equal to the UPS LOCs.*fn2 ESUF ¶ 7. Defendant, pursuant to a request by Ashford, issued two standby letters of credit (the "UCDC LOCs") on September 20, 2001, for $330,104.80 each. UCDC's Statement of Uncontroverted Facts ("USUF") ¶¶ 1-2, 4. UPS was the stated beneficiary for each of the UCDC LOCs. USUF ¶¶ 3, 5.

Each of the UCDC LOCs issued on September 20, 2001, contains the following demand term:

1. BENEFICIARY STATEMENT READING AS FOLLOWS: THE AMOUNT OF OUR DRAFT REPRESENTS FUNDS DUE AS A RESULT OF THE FAILURE OF ASHFORD INTERNATIONAL, INC. TO PERFORM AS TO THE TERMS OF THE CONTRACT BETWEEN ASHFORD INTERNATIONAL, INC. AND THE MINISTRY OF EDUCATION OF JORDAN CONTRACT NO. (1/27/2000); LOAN NO. 3684-JO.

UCDC LOCs at 1; Ex. G. The UCDC LOCs also required "the original . . . letter of credit must accompany the documents at the time of presentation." UCDC LOCs at 1; Ex. G. On September 25, 2001, UCDC issued Amendment One to each of the UCDC LOCs, which provided in part:

1. DOCUMENT NUMBER ONE NOW READS THE AMOUNT OF OUR DRAFT REPRESENTS FUNDS DUE US AS A RESULT OF DRAWING OF OUR LETTER OF CREDIT BY ORDER OF ASHFORD INTERNATIONAL, INC. UNDER THE TERMS OF THE CONTRACT NO. (1/27/2000); LOAN NO. 3684-JO ISSUED BY MINISTRY OF EDUCATION - THE HASHEMITE KINGDOM OF JORDAN.

Amendment One at 1; Ex. H.

On April 29, 2003, UPS made a demand for payment to UCDC under each of the UCDC LOCs. ESUF ¶ 18. On May 9, 2003, UCDC issued a Notice of Dishonor rejecting UPS's demand for payment, citing discrepancies in UPS's draw application.*fn3

ESUF ¶ 19. On May 14, 2003, UPS corrected the cited discrepancies in its original draw application and again presented the UCDC LOCs for draw. ESUF ¶ 20. UPS never presented the original UCDC LOCs to UCDC. USUF ¶ 27. UCDC failed to honor UPS's May 14, 2003 draw on the UCDC LOCs. ESUF ¶ 22.

UPS filed a claim with plaintiff under the Guarantee Agreement between UPS and plaintiff, which provided a guarantee to UPS in the event that Ashford defaulted. ESUF ¶¶ 6, 15. Upon payment of the claim, UPS assigned to plaintiff: all of its right title and interest in, and all sums of money now due or to become due to UPS[] under the Loan Agreement by and between UPS[] and Ashford International . . . and any and all other instruments and property incident to [Ashford's] indebtedness under the Loan, including but not limited to, security and/or guarantee agreements.

UPS Assignment to Ex-Im at 1; ESUF ¶ 15; Ex. M.

III. LEGAL STANDARD

Summary judgment is appropriate where "there is no genuine issue as to any material fact" and "the movant is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). The moving party has the initial burden of identifying relevant portions of the record that demonstrate the absence of a fact or facts necessary for one or more essential elements of each cause of action upon which the moving party seeks judgment. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

If the moving party has sustained its burden, the nonmoving party must then identify specific facts, drawn from materials on file, that demonstrate that there is a dispute as to material facts on the elements that the moving party has contested. See Fed. R. Civ. P. 56(c). The nonmoving party must not simply rely on the pleadings and must do more than make "conclusory allegations [in] an affidavit." Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 888 (1990); see also Celotex, 477 U.S. at 324. Summary judgment must be granted for the moving party if the nonmoving party "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Id. at 322; see also Abromson v. Am. Pac. Corp., 114 F.3d 898, 902 (9th Cir. 1997).

In light of the facts presented by the nonmoving party, along with any undisputed facts, the Court must decide whether the moving party is entitled to judgment as a matter of law. See T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 631 & n.3 (9th Cir. 1987). When deciding a motion for summary judgment, "the inferences to be drawn from the underlying facts . . . must be viewed in the light most favorable to the party opposing the motion." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citation omitted); Valley Nat'l Bank of Ariz. v. A.E. Rouse & Co., 121 F.3d 1332, 1335 (9th Cir. 1997). Summary judgment for the moving party is proper when a rational trier of fact would not be able to find for the nonmoving party on the claims at issue. See Matsushita, 475 U.S. at 587.

IV. DISCUSSION

A. Plaintiff's Standing

As a preliminary matter, the Court must address defendant's contention that plaintiff does not have standing to assert its claims against UCDC.*fn4 Def.'s Mot. at 9; Def's Opp'n at 19. Defendant argues that because plaintiff was not a party to the UCDC LOCs, or any other agreement between defendant and UPS, plaintiff does not have standing to enforce the LOCs. Id. (citing Gantman v. United Pac. Ins. Co., 232 Cal. App. 3d 1560, 1566 (Cal. Ct. App. 1991). Defendant argues that under the International Chamber of Commerce's Guidelines for standby letters of credit ("ISP98")*fn5 and California Commercial Code § 5114(c),*fn6 UPS's assignment of the UCDC LOCs to plaintiff confers no rights upon plaintiff unless defendant consents to the assignment. Def.'s Mot. at 9--13; Def.'s Opp'n at 19--22. Defendant argues that plaintiff cannot maintain this action on the grounds that plaintiff was assigned the UCDC LOCs because defendant never acknowledged the assignment. Id.

Plaintiff asserts it has standing because UPS assigned to plaintiffall right, title, and interest to the Loan, and all other instruments and property incident to Ashford's indebtedness under the Loan, including but not limited to, security and/or guarantee agreements. Pl.'s Opp'n at 6. Plaintiff argues that UPS's assignment included UPS's claims against UCDC for wrongful dishonor of the UCDC LOCs. Id.; Pl.'s Reply at 10. Plaintiff argues that because UPS, the original beneficiary under the UCDC LOCs, demanded payment from UCDC there is no issue concerning the assignment of drawing rights. Pl.'s Opp'n at 11. Thus, according to plaintiff, because UPS simply assigned to plaintiff the right to sue UCDC for wrongful dishonor of the UCDC LOCs, plaintiff has standing to assert its claims. Id.; Pl.'s Reply at 10.

Defendant replies that the ISP98 does not permit an assignment of a claim for relief. Def.'s Reply at 18--19; Def.'s Opp'n at 19--21. Defendant argues that the ISP98 only permits UPS to either transfer its drawing rights or ...


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