UMB Bank, N.A. v. Soleil Chartered Bank

Background

Marquette Transportation Finance, LLC provided operational financing to Sam Kane Beef Processors. On March 15, 2018, Soleil Chartered Bank issued a $7 million standby letter of credit to secure Sam Kane’s obligations to Marquette. The letter of credit required Marquette to present its claim and surrender the original letter of credit at the bank’s counters through bonded courier service, and to include a copy of Marquette’s default notice to Sam Kane. The letter was governed by the Uniform Customs and Practice for Documentary Credits, a set of international rules for letters of credit.

On September 4, 2018, Marquette submitted a draw request with the required documents. Govind Srivastava, writing on the bank’s letterhead, rejected the request because the default notice had not been verified by the bank and the bank had not been informed of the notice. Marquette disputed that the letter of credit required advance notice or verification before it could make the draw.

Marquette moved for summary judgment on its claim that the bank wrongfully dishonored the letter of credit. Soleil Capitale Corporation, Soleil Capitale Group, and Srivastava moved to dismiss the claims alleging that they were alter egos of Soleil Chartered Bank and therefore jointly liable.

Summary-Judgment Ruling

The court applied New York law. To prevail on a claim for wrongful dishonor of a letter of credit, Marquette had to show that the bank issued the letter for Marquette’s benefit, that Marquette timely presented documents conforming to the letter’s requirements, and that the bank failed to pay. The parties disputed only whether Marquette had made a conforming presentation.

The court held that the letter of credit was unambiguous. It required Marquette to make the draw request at the bank’s counters through bonded courier service and to include a copy of the default notice. The parties did not dispute that Marquette satisfied those requirements. The court rejected the bank’s interpretation that Marquette had to notify the bank of the default or ensure that the bank verified the notice before Marquette submitted its request.

The court read the verification language as allowing the bank to verify the default notice after receiving the draw request. Because Marquette strictly complied with the letter’s express requirements, the court held that Soleil Chartered Bank was liable for wrongful dishonor. Marquette’s motion for summary judgment was granted as against Soleil Chartered Bank and Srivastava.

Motion-to-Dismiss Ruling

Under Rule 12(b)(6), a court may dismiss a claim that does not contain enough factual allegations to make the claimed entitlement to relief plausible. At this stage, the court treated the complaint’s factual allegations as true and generally could not consider outside evidence.

New York law permits a plaintiff to pierce the corporate veil—meaning hold a related person or company responsible for a corporation’s conduct—when the defendant exercised complete domination over the corporation in the relevant transaction and used that domination to commit a wrong that injured the plaintiff.

The court held that the complaint sufficiently alleged alter-ego liability against Srivastava. It alleged that he owned, founded, and managed Soleil Chartered Bank; controlled its business; placed his son in a senior position; and personally signed the letter rejecting Marquette’s draw request. The complaint also alleged that Srivastava used the bank to benefit himself and his family at the expense of third parties. The court found those allegations sufficient to plead both domination and misuse of the corporate form. It therefore denied the motion to dismiss Srivastava. The court did not consider Srivastava’s declaration because outside evidence generally cannot be considered on a Rule 12(b)(6) motion.

The court reached a different conclusion for Soleil Capitale Corporation and Soleil Capitale Group. It held that, regardless of their relationship with or domination of Soleil Chartered Bank, the complaint did not allege that either company used that relationship to commit a wrong against Marquette or participated in the transaction. The court granted the motion to dismiss those two companies. The opinion does not state that the dismissals were with or without prejudice.

Disposition

The court granted Marquette’s motion for summary judgment as to the first claim against Soleil Chartered Bank and Srivastava. It granted the motion to dismiss Soleil Capitale Corporation and Soleil Capitale Group, denied the motion to dismiss Srivastava, and stated that both motions were otherwise denied. The clerk was directed to close Dockets 80, 85, and 94.