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

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

Indoafric Exports Private Ltd. Co. v. Citibank, N.A., 2017 U.S. App. LEXIS 16729 (2d Cir. Aug. 31, 2017), affirming 15-cv-9386 (S.D.N.Y. Nov. 7, 2016) (Marrero, J.)

Second Circuit Court of Appeals Affirms Dismissal
of Complaint Against Bank Client as Time-Barred

On August 31, 2017, the Court of Appeals for the Second Circuit unanimously affirmed Judge Marrero’s decision, dismissing at the pleading stage, a federal court complaint against a client bank that allegedly wrongfully dishonored two international letters of credit.  The two LCs at issue expired and were dishonored by Citibank in 1996 based on deficiencies in the documents presented.  The LCs 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.

The Court of Appeals rejected appellant’s equitable estoppel arguments, holding that plaintiff’s fifteen-year failure to commence an action after nonpayment of the LCs amounted to “an inexcusable lack of diligence.”  The Court also dismissed appellant’s contention that the bank’s purported “silence” in response to Indoafric’s alleged inquires provided a basis to equitably toll the statute of limitations.  Finally, the Court denied appellant’s bid for discovery, noting the informal discovery provided by the bank which plaintiff attached to the complaint.