### The HONORABLE CATHERINE D. PERRY, United States Distric t 1 

### Judge for the Eastern District of Missouri. ___________ No. 95-2959

___________ Moog World Trade Corporation, * * Plaintiff - Appellant, * * Appeal from the United States v. * District Court for the * Eastern District of Missouri. Bancomer, S.A.; Boatmen's * National Bank of St. Louis, * * Defendants - Appellees. *

___________ Submitted: February 16, 1996 Filed: July 30, 1996

___________ Before LOKEN, BRIGHT, and MORRIS SHEPPARD ARNOLD, Circuit Judges.

___________ LOKEN, Circuit Judge.

This cas e requires us to apply the familiar due process limitatio n
onpersonal jurisdiction to the rather unfamiliar realities of financing inte rnational trade. Moog World Trade Corp. ("Moog") agreed to sel l automo bile parts to its customer in Mexico, Commercializadora d e Refacciones en Genera les S.A. ("CRG"). To finance this purchase, CRG had its Mexican bank, Bancomer, S.A., issue an irrevocable commercial letter of credit naming Moog as beneficiary. When Moog's draw under the letter of cre dit was dishonored by Boatmen's National Bank, the Missour i conf irming bank, Moog sued Boatmen's and Bancomer. The district court 1 dismissed Bancomer for lack of personal jurisdiction, and Moog appeals tha t ruling. We affirm.

### Confirmation "constitutes a definite undertaking o f 2 

### [Boatmen's], in addition to that of [Bancomer] . . . to pay, o r that payment will be made," if Moog makes a proper draw under the let ter of credit. Uniform Customs and Practices for Documentar y Credits, Art. 10.b.i., Int'l Chamber of Commerce Pub. No. 40 0 (eff. Oct. 1, 1984) ("UCP"). The UCP is an internationally accepte d codifi cationof banking practice and custom regarding letters o f credit. Under Missouri law, i f a letter of credit so provides, as Bancomer's did, the UCP supplants Article 5 of Missouri's uniform commercial code. See Mo. Ann. Stat. § 400.5-102(4).
-2- I.

Bancome r issued the letter of credit in August 1992 at the reques t of its customer, CRG. The letter of credit promised that Moog a s beneficiary would be paid $383,636 at Boatmen's offices in St. Louis upon Moog's timely presentation of a sixty-day time draft accompanied b y specified documents confirming that Moog had shipped the auto parts to CRG

. Banc omer issued the letter of credit by a tested telex to Boatmen's

. Boa tmen's then sent the letter of credit to Moog, with a cover lette r explaining:

We enclose herewith an authenticated irrevocable letter o f credit opened in your favor by [Bancomer].
* * * * * Drafts a re to be drawn on the Boatmen's National Bank of St

. Louis, St. Louis, Missouri.
* * * * *
We [Boa tmen's] add our confirmation to the issuing bank' s let ter of credit and engage with you that draft(s) and/o r documents drawn under an d in compliance with the terms of this credit will be duly honored. 2
Two weeks before the letter of credit expired, Moog presented adraft and supporting documents to Boatmen's, which dishonored the draw, noting discre pancies between the shipping documents and the letter of credit' s specifications. Moog had time to cure these discrepancies by submitting amended documents to Boatmen's.

### -3-

Instead, Moog instruc ted Boatmen's to present the dishonored documents to Bancomer in Mexico. When Bancomer refused to honor the draw, citing six alleged documentary d iscrepancies, a Moog representative and its attorney visited Bancomer's office in Guadalajara, Mexico, requesting an explanatio n of the dishonor. Bancomer responded that Moog should contact Boatmen's.

With the letter of credit now expired, Moog brought this diversit y action, claiming wrongful dishonor and untimely notice of dishonor by both banks. The district court dismissed Bancomer for lack of persona l jurisdictionand dismissed the untimely-notice-of-dishonor claim agains t Boat men's on the merits. Moog dismissed its wrongful dishonor clai m against Boatmen's without prejudice and appealed the district court' s rulings. Moog later dismissed its appeal against Boatmen's, leaving for us only the question whether the district court has personal jurisdiction over Bancomer.
"Once a defendant has challenged a f ederal court's jurisdiction, the plaintiff bears the b urden of proving that jurisdiction exists." Falkirk Mining Co. v. Japan S teel Works, Ltd. , 906 F.2d 369, 373 (8th Cir. 1990). Ban comer challenged the district court's jurisdiction, submittin g
unc ontroverted evidence that it has no office, employee, or property i n Missouri; is not qualified to do business in Missouri; pays no Missour i taxes ; and transacts no other business in Missouri. Moog responded b y submitting uncontrove rted evidence that, in the two years prior to August 199 2, Bancomer issued thirty-six letters of credit in favor of Missour i beneficiaries, in the total amount of $4.7 million, including four prior letters of credit at the request of CRG for the benefit of Moog in amounts of $100,000, $200,000, $250,000, and $389,000. Because the record does not reflect the statu s of the transaction between Moog and CRG underlying the letter of credit, and because the letter of credit is independent of that underlying transaction, the personal jurisdiction issue turns entirel y upon the letter of credit facts of record. We review this jurisdiction

### -4-

issue de novo

. See General Elec. Capital Corp. v. Grossman , 991 F.2d 1376 , 1387 (8th Cir. 1993).

II.

The federal court in a diversity case must determine whethe r defendant is subject to the court's jurisdiction under the state long arm statute, and if so, whether exercise of that jurisdiction comports with du e process. As pertinent here, the Missouri long arm statute confer s jurisdict ion over "any cause of action arising from . . . (1) [t]h e transaction of any business within this state [o r] (2) [t]he making of any contract within this state." Mo. Ann. Stat. § 5 06.500.1. Missouri courts have construed this statute "to extend the jurisdiction of the courts of this state over nonresident defendants to the ex tent permissible under the Due Process Clause." State ex rel. Deere & Co. v. Pinnell , 454 S.W.2d 889 , 892 (Mo. banc 1970). Jurisdiction must be based upon "the act or conduct set forth in the statute" (as opposed to conduct not encompassed by th e statute that might otherwise be a permissible ba sis for jurisdiction), and the cause of action must arise from the nonresid ent defendant's activities in Missouri. Scullin Steel Co. v. National Ry. Utilization Corp. , 676 F.2 d 309, 312 (8th Cir. 1983).

Th oughit is often difficult to apply, the governing due proces s standard is well-established in this circuit:

Th e due process clause requires there be "minimu m contacts" between the de fendant and the forum state before the forum state may exercise jurisdiction over the defendant

. Worl dwide Volkswagen v. Woodson , 444 U.S. 286, 291 (1980)

. Sufficient contacts exist when "the defendant's conduct an d con nection with the forum State are such that he shoul d reasonably anticipate being haled into court there," id . a t 297 , and when "maintenance of the suit does not offen d 't raditional notions of fair play and substantial justice.' " International Shoe Co. v . Washington , 326 U.S. 310, 316 (1945) (quoting Milliken

### -5- v. Meyer , 311 U.S. 457, 463 (1940)). In assessing th e defendant's "reasonable anticipation," there must b e "'some act by which the defendant purposefully avails itself of th e privilege of conducting activities within the forum State, thus inv oking the benefits and protections of its laws.'" Burge r Kin g Corp. v. Rudzewicz , 471 U.S. 462, 475 (1985) (quotin g Hanson v. Denckla , 357 U.S. 235, 253 (1958)).

General E lectric , 991 F.2d at 1387, quoting Soo Line R.R. v. Hawke r Siddeley Can., Inc. , 950 F.2d 526, 528-29 (8th Cir. 1991). To put th e issues of fair play, reasonable anticipation, and purposeful availing in proper perspective, we must examine the purposes and functioning of a n international commercial letter of credit.

Letters of credit have been used for nearly 3000 years. Though they stretchcommon law contract principles such as consideration, letters of credit were eventuall y accepted and enforced by Anglo-American common law courts. See Rufus J. Trimble, The Law Merchant and the Letter of Credit , 61 Harv. L. Rev. 981, 983-88 (1948). In the present-day United States , letter of credit principles have been codified i n Article 5 of the uniform commercial code, which is generally consistent with the internationall y promulgated UCP.

The co mmercial letter of credit is widely used to assist sale s transactions, including international export/import transactions. Th e parties to such a transaction have conflicting needs and concerns. Th e exporter-seller does not wish to part with its goods without knowing i t will be paid, even if the buyer later changes it s mind, becomes insolvent,
or claims upon inspection that the goods are non-conforming. The seller also wants prompt payment in its own currency, even if the buyer need s credit financing. Th e importer-buyer, on the other hand, may need credit financing and in any event does not wish to pay for the goods without firm evide nce that they have been shipped. Each party typically fear s litigation in the other party's "home court."

### -6- The commercial letter of credit bridges these differences. Th e buyer's bank issues the letter of credit naming the seller as beneficiary. The letter of credit is the issuer's irrevocable obligation to pay a state d amount of money to th e seller-beneficiary, at a stated time and place and in a specified currency. To obtain payment, the seller must presen t specif ied documents, typically, the seller's invoice and shippin g documents, thereby confirming to the buyer that (i) the right goods (ii)
are in the hands of a common carrier (iii) with the agreed-upon cost s prepaid. The letter of credit usually requires the issuing bank to honor
or dishonor the seller's presentation (draw) while the goods are i n transit. If the bankdishonors, it must return the shipping documents to the seller, who then has the exclusive right to claim the goods from the
carr ier. If the draw is honored, the seller is promptly paid, or in a credit sale is promised payment at a specified time by the credit-worthy issuing b ank, a promise the seller can convert to immediate cash b y discou nting. See generallyBurton V. McCullough, Letters of Credi t §§ 1.03-1.04 (1995).

This comm ercial letter of credit transaction creates three distinct contractual relations hips -- the underlying transaction between the buyer and seller; the buyer's agreement to reimburse the issuing bank fo r payments under the letter of credit; and the let ter of credit itself. See McCullough, § 1.05[1] at 1-35 to 1-39 (1995); B.E.I. Int'l, Inc. v. Thai Military Bank , 978 F.2d 440, 442 (8th Cir. 1992) . The simplest commercial letter of credit contains the issuer's irrevocable promise to pay drafts drawn by the beneficiary at the issuer's counter (place of business). But in an international transaction, the seller typi cally wants to present the draw locally and to b e paid in its own currency; the seller may also want a local bank to decide whether a draw complies w ith the letter of credit's documentary requirements. The seller can meet these concerns by persuadin g the buyer to have its bank issue a letter of cre dit payable at a bank near the selle r's place of business. That bank may be an advising bank -

- simply a conduit

### -7-

for the issuing bank's decisions -- or it may be a confirming bank tha t decides whether the draw complies and thereby "a dd[s] its own liability to that of the issuing bank." Venizelos, S.A. v. Chase Manhattan Bank , 425 F.2d 461, 465 (2d Cir. 1970). Here, Moog persuaded CRG to have Bancomer issue the letter of c redit with Boatmen's as confirming bank. With these fundam ental commercial concepts in mind, we return to the jurisdictio n issue.

A.
Moog firs t argues that Bancomer is subject to personal jurisdiction becaus e Bancomer made a contract in Missouri, for purposes o f § 506.500.1(2), when it issued an irrevocable letter of credit that Moog "accepted" by presenting a draft for payment. W e disagree. When Bancomer issu ed its letter of credit, it did not make a contract with Moog, i t perfo rmeda contract with its Mexican customer, CRG. The identity an d locationof CRG's beneficiary was of little if any concern to Bancomer , because it looked to CRG for both its letter of credit fee an d reimbursement of any payment Bancomer might make under the credit. True, the le tter of credit created a separate, conditional obligation runnin g fro mBancomer to Moog as beneficiary. But that bare letter of credi t obligation, while con tractual in nature, was not the making of a contract with Moog . Nor was it the transacting of business in Missouri, fo r purpos es of § 506.500.l(1). See State ex rel. Bank of Gering v

. Schoe nlaub , 540 S.W.2d 31 (Mo. banc 1976) (Nebraska bank which paid 2 2 drafts drawn on a Missouri bank payable from the account of the Nebraska bank's customer was not subject to Missouri long arm jurisdiction in a sui t to recover on six additional drafts the Nebraska bank dishonored). Se e also Jet Charter Serv., Inc. v. Koeck , 907 F.2d 1110, 1113-15 (11th Cir. 1990) (no jurisdiction in Florida over Swiss bank for alleged breach o f agreement to issue letter of credit payable in F lorida because beneficiary is not a p arty to an agreement to issue), cert. denied , 499 U.S. 93 7 (1991).

### -8-

Thus, this theory founders on the first prong of the personal jurisdiction analysis, the scope of the Missouri long-arm statute.

Mo reover, relying upon traditional due process principles, othe r federal courts have been virtually unanimous in holding that a bank issuin g
a commercial letter of credit at the request of its customer, payable at the bank's offices, does not without more subject itself to persona l jurisdiction in a distant forum, such as a court where the letter of credi t beneficiary resides. See Pacific Reliant Indus. v. Amerika Samoa Bank , 90 1 F.2d 735, 737 (9th Cir. 1990); Leney v. Plum Gro ve Bank , 670 F.2d 878, 880 (10th Cir. 1982); Empire Abrasive Equipment Corp . v. H.H. Watson Inc. , 567 F.2d 554, 558 (3d Cir. 1977); Occidental Fire & Cas. Co. v. Continenta l Ill. Nat'l Bank , 689 F.Supp. 564, (E.D.N.C. 1988 ). Similarly, courts have concluded that there is no jurisdiction over the foreign issuer of a lette r of credit payable elsewhere in the United States. See Chandler v. Barclay s Ban k, PLC , 898 F.2d 1148, 1151 (6th Cir. 1990) (Michigan court has n o jurisdic tion over Egyptian issuer of a letter of credit payable a t confi rming bank in New York); H. Ray Baker, Inc. v. Associated Bankin g Corp. , 592 F.2d 550, 552 (9th Cir.), cert. denied , 444 U.S. 832 (1979 ) (California court has no jurisdiction over Phillipine issuer of letter of
cre dit payable in New York); Southern Plastics Co. v. Southern Commerc e Bank , 423 S.E.2d 128, 132 (S.C. 1992). As the court explained in Empire Abrasive , 567 F.2d at 558:

We do not th ink that by issuing a letter of credit for a Rhode Island customer, calling for its performance in Rhod e Island, the bank can be said to have subjected itself to th e adjudicatoryauthority of Pennsylvania with respect to it s obligat ions under the letter of credit solely because th e beneficiary was a Pennsylvania corporate resident.

We conclude that this reasoning is even more compelling when th e issuer is a foreign bank that has financed an import transaction with a commercial letter of credit payable at the

### -9-

foreig nbank's counter. The U.S. seller-beneficiary could have bette r protected its interests by delaying shipment until the letter of credit wa s honored, or

by reclaiming the goods from the car rier after dishonor, orby making th e letter of credit payable at the counter of a U.S. confirmin g bank. When the selle r has failed to protect itself in this manner, it is not fair play -- and it risks the future availability of this inexpensive international banking device -- to subject the f oreign bank to the burdens of wrongful dishonor litigation in the United States.

B.

Moog next contends that there is personal jurisdiction in Missour i because Bancomer made its letter of credit payab le at the Missouri counter of a confirming bank, Boatmen's. Bancomer's decision (at CRG's request) to make i ts letter of credit payable in Missouri, and to enlist th e services of a local confirming bank, is jurisdictionally significant, as several of the above-cited cases have noted in d icta. See Leney , 670 F.2d at 880; H. Ray Baker , 592 F.2d at 553; Empire Abrasive , 567 F.2d at 558. For example, when Boatmen's agreed to act as confirming bank, Bancome r be came contractually obligated to reimburse Boatmen's if it properl y honored a draw. See UCP 400, Art. 16.a. Had Bancomer refused to reimburs e Boatmen's for honoring a draw, we have little doubt that the Missouri long

arm statute would con fer personal jurisdiction over Bancomer in an action by Boatmen's asserting breach of this contractual duty to reimburse.

But t hat does not resolve this case. Boatmen's dishonoredMoog' s draw, In doing so, B oatmen's acted on its own behalf as confirming bank. The lette r of credit provided that draws could be presented only a t Boa tmen's counter. Thus, when Moog instructed Boatmen's to present th e dishonored draw to Bancomer, Moog did not make an authorized draw under th e letter of credit. Ra ther, it asked that Bancomer, with CRG's permission, waive the documentary

### A more difficult question would be whether Missouri court s 3 

### have p ersonal jurisdiction over a foreign bank that issued a commercial letter of credit payable at the counter of a Missour i bank t hat is not a confirming bank. In that case, the foreig n issuer makes the final decision whether to pay in Missouri , and the beneficiary has no one to sue for wrongful dishonor other than the issuer. We express no view as to how this issue should be d ecided.
-10- discrepancies that caused Boatmen's to dishonor. In other words, Moo g sought relief outside the four corners of the letter of credit. That is
a recognized commercial practice, indeed, it is expressly referenced in th e latest r evision of the UCP. See Uniform Customs and Practice fo r DocumentaryCredits/1993 Revision, Art. 14.c., ICC Pub. 500. But Moog's unilateral action in making this request directly to Bancomer, and Moog's follow- up visit to Guadalajara seeking Bancomer's explanation for it s "dishonor," cannot be labeled the transacting of business by Bancomer in Miss ouri. Not surprisingly, therefore, Moog has cited no prior cas e supporting this contention.
In these circumstances, we agree with the district court's reso lution of the personal jurisdiction issue. Moog protected its interests under th e let ter of credit when it obtained confirmation by Boatmen's, which the n becam e subject to suit in Missouri for wrongful dishonor. Bancomer a s foreign issuer took no action beyond securing a local confirming bank that would subject it to the jurisdiction of the Missouri courts. It is more consistent with fair play and the need for effic ient international markets to l imit Moog in this lawsuit to its wrongful dishonor claim agains t Boatmen's, which it h as abandoned. The fact that Bancomer had previously is sued numerous commercial letters of credit naming various Missour i beneficiaries to assi st other export/import transactions does not, in our view, alter the analysis. See Occidental Fire , 689 F. Supp. at 565 (seven letters of credit); see generally Helicopteros Nacionales de Colombia, S.A

. v. Hall , 466 U.S. 408, 414-16 & n.9 (1984). 3

### -11- C.
Finally, Moog argues that the district court erred in deciding th e personal jurisdictionissue before Bancomer responded to Moog's discovery requests addressing that issue. In responding to Bancomer's motion t o dis miss, Moog did not ask the district court for leave to complet e jurisd ictional discovery. Its discovery requests were served after th e motion to dismiss was briefed but before the district court ruled. When the court ruled adversely, Moog cited the pending discovery requests in it s motion to reconsider without explaining how Banc omer's discovery responses migh t affect the jurisdiction issue. We have examined the discover y requests. Most relate to the merits of the lawsuit. Those seekin g di sclosure of other letter of credit transactions involving Missour i be neficiaries are immaterial given the array of transactions alread y disclosed in the juri sdiction motion papers. In these circumstances, the district court in declining Moog's tardy request for more discovery did no t commit a "gross abuse of discretion resulting in fundamental unfairness." Lee v. Armontrout , 991 F.2d 487, 489 (8th Cir.) (standard of review), cert
. denied , 114 S. Ct. 209 (1993).
The judgment of the district court is affirmed.

A true copy.

Attest:

CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.