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 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 its default notice to Sam Kane. The letter was subject to the Uniform Customs and Practice for Documentary Credits.

On September 4, 2018, Marquette submitted a draw request, the original letter of credit, and a copy of the default notice. Govind Srivastava, writing on the bank’s letterhead, rejected the request, stating that the notice had not been verified by Soleil Chartered Bank and that the bank had not been informed of the notification.

Marquette moved for summary judgment on its claim that the bank wrongfully dishonored the letter of credit. Soleil Capitale Corporation, Soleil Capitale Group, and Govind Srivastava moved to dismiss the amended complaint’s allegations that they were alter egos of Soleil Chartered Bank and were jointly liable for the bank’s conduct.

Summary Judgment

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

The court held that the letter’s requirements were 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 Sam Kane’s default or obtain verification before making the draw request. The letter instead provided that the bank could verify the default notice after receiving the request. Because Marquette strictly complied with the letter’s requirements and the facts were undisputed, the court held that Soleil Chartered Bank was liable for wrongful dishonor and granted Marquette’s motion for summary judgment on its first claim.

Motion to Dismiss

Under Rule 12(b)(6), a complaint may proceed only if its factual allegations plausibly show that the defendant is liable. The court considered the allegations against the moving defendants under New York’s alter-ego and corporate-veil-piercing law.

The court denied the motion to dismiss as to Srivastava. The complaint alleged that he owned and controlled Soleil Chartered Bank, served as its principal executive officer and managing director, managed its business, placed his son in a senior position, and personally signed the letter rejecting Marquette’s draw request. It also alleged that he used the bank to benefit himself and his family at third parties’ expense. Accepting those allegations as true at the motion-to-dismiss stage, the court found that the complaint adequately alleged both control and misuse of the corporate form.

The court granted the motion to dismiss as to Soleil Capitale Corporation and Soleil Group. Although the complaint alleged relationships and shared personnel among the companies, it did not allege that those entities used their relationship with Soleil Chartered Bank to commit a wrong against Marquette or participated in the letter-of-credit transaction.

Disposition

The court granted Marquette’s motion for summary judgment as to its first claim against Soleil Chartered Bank. It granted the moving defendants’ motion to dismiss Soleil Group and Soleil Capitale, denied it as to Srivastava, and stated that both motions were otherwise denied. Judge Lorna G. Schofield directed the Clerk of Court to close Dockets 80, 85, and 94.