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Indoafric Exports Private Ltd.Co. v. Citibank, N.A.

Federal Court Dismisses Complaint Against Bank Client as Time-Barred

ZEK obtained the dismissal, at the pleading stage, of a federal court complaint against a client bank that allegedly wrongfully dishonored two letters of credit.  Indoafric Exports Private Ltd. Co. v. Citibank, N.A. (15-cv-9386) (Nov. 7, 2016) (Marrero, J.).  The two LCs at issue expired and were dishonored by Citibank in 1996 based on deficiencies in the documents presented.  They were issued by a Kenyan bank in favor of an Indian-based truck seller, and confirmed by an Indian bank.  Citibank New York acted as confirming bank which included guaranty of payment in case of the failure of the Kenyan bank. 

Plaintiff asserted claims of wrongful dishonor, unjust enrichment and promissory estoppel.  Although the two letters of credit were relatively modest in dollar amount, plaintiff attempted to utilize the passage of time to inflate its claims to nearly one million dollars, including interest and alleged consequential damages.

By their terms the letters of credit were governed by the 1993 version of the Uniform Customs and Practice for Documentary Credits (UCP 500) and an older version of the Uniform Commercial Code which did not include the current Article 5 provisions setting a one-year statute of limitations and precluding recovery of consequential damages.  (UCC §§ 5-115 and 5-111(b).) 

The Court agreed with ZEK’s position that all the claims were time-barred and rejected plaintiff’s position that the statute of limitations was equitably tolled by any words, conduct or alleged lack of notice by the client bank.  The court also agreed that the common law claims failed as a matter of law because the dispute was governed by contract. 

ZEK made effective use of the documents that plaintiff appended to its complaint to defeat the claims at the pleading case, thus avoiding potentially expensive discovery involving banks and parties located on three continents.