Opinion ID: 449549
Heading Depth: 2
Heading Rank: 2

Heading: CBK's Attempt to Draw Under the Letter of Credit

Text: 19 Paccint contends that CBK submitted to the jurisdiction of the California courts by attempting to draw under the letter of credit. Specifically, Paccint argues that this case is controlled by the rules relating to intentional torts. The commission of an intentional tort in a state is a purposeful act that will satisfy the first two requirements under Data Disc. E.g., Data Disc, 557 F.2d at 1288. A tortious act, standing alone, can satisfy all three requirements under Data Disc if the act is aimed at a resident of the state or has effects in the state. E.g., Calder v. Jones, --- U.S. ----, 104 S.Ct. 1482, 1486-87, 79 L.Ed.2d 804 (1984); Data Disc, 557 F.2d at 1288. Paccint contends that CBK committed an intentional fraudulent act in California by demanding payment from Chase. 7 20 We conclude that CBK's allegedly fraudulent demand for payment from Chase is sufficient to satisfy the first two requirements under Data Disc. As we noted in Data Disc, [t]he inducement of reliance in California is a sufficient act within California to satisfy the requirement of minimum contacts where the cause of action arises out of that inducement. 557 F.2d at 1288. Paccint alleges that CBK's demand for payment in California induced reliance on the part of Chase. This allegation satisfies the first two requirements under Data Disc. 21 Paccint, however, argues that CBK committed an intentional tort that was aimed at a California resident and had effects in California. We disagree. Even assuming that CBK's actions were fraudulent, the victim of the fraud was Paccint, which is a Delaware corporation with its principal place of business in Bellevue, Washington. Paccint has not alleged that it does business in California. While Chase is a California resident, Chase was not defrauded. To illustrate this point, suppose that Chase had filed suit against CBK for fraud after allowing CBK to draw under the letter of credit. The tort of fraudulent misrepresentation has five elements: (1) misrepresentation, (2) knowledge of falsity, (3) intent to defraud, (4) justifiable reliance, and (5) resulting damage. Watts v. Crocker-Citizens National Bank, 132 Cal.App.3d 516, 522 n. 2, 183 Cal.Rptr. 304, 307 n. 2 (1982); Prosser and Keeton on the Law of Torts Sec. 105, at 728 (W. Keeton 5th ed. 1984). The first four elements are present, but the fifth is not. The issuer of a letter of credit assumes no liability or responsibility for the genuineness, falsification or effect of any document which appears on ... examination to be regular on its face. Cal.Com.Code Sec. 5109(2). In fact, the issuer must honor a demand for payment that complies with the terms of the letter of credit. Id. Sec. 5114(1). Even if the issuer is notified that the transaction is fraudulent, it may honor the demand for payment in good faith. Id. Sec. 5114(2)(b). Chase received no such notice in this case. Unless the issuer has been notified of the fraudulent nature of the transaction and acts in bad faith, the customer must immediately reimburse the issuer. Id. Sec. 5114(3). As a result, Chase would not incur actual damages from CBK's fraudulent act. Accordingly, Chase could not maintain an action against CBK for fraud. See Gold v. Los Angeles Democratic League, 49 Cal.App.3d 365, 374, 122 Cal.Rptr. 732, 739 (1975). 22 In sum, we find that the first two requirements under Data Disc are satisfied by the allegedly fraudulent demand for payment. 8 We do not, however, find that Paccint's allegations show an intentional tort with effects in California. We now turn to the third requirement under Data Disc, under which we assess the reasonableness of exercising jurisdiction on the basis of CBK's allegedly fraudulent demand for payment. IV REASONABLENESS 23 In analyzing the reasonableness of exercising jurisdiction, we apply seven factors: 24 (A) the extent of the purposeful interjection into the forum state, (B) the burden on the defendant of defending in the forum, (C) the extent of conflict with the sovereignty of defendant's state, (D) the forum state's interest in adjudicating the dispute, (E) the most efficient judicial resolution of the controversy, (F) the importance of the forum to plaintiff's interest in convenient and effective relief, and (G) the existence of an alternative forum. 25 Insurance Co. of North America v. Marina Salina Cruz, 649 F.2d 1266, 1270 (9th Cir.1981) (citations omitted). 26 A. The Extent of the Purposeful Interjection into the Forum State 27 CBK's contacts with California are minimal. CBK's only purposeful interjection into California was the allegedly fraudulent demand for payment. Because that act was aimed at a nonresident, we conclude that the extent of CBK's purposeful interjection into California was negligible. Cf. Olsen ex rel. Sheldon v. Government of Mexico, 729 F.2d 641, 649 (9th Cir.) (finding a substantial interjection into California when an aircraft crashed inside the California border), cert. denied, --- U.S. ----, 105 S.Ct. 295, 83 L.Ed.2d 230 (1984). 28 B. The Burden on the Defendant of Defending in the Forum 29 Although transportation is less onerous today, there can be little doubt that CBK would bear a heavy burden if it is required to defend this action in California. See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292, 100 S.Ct. 559, 564, 62 L.Ed.2d 490 (1980) (noting that the burden on the defendant is always a primary concern). Although the district court noted that transportation is available from Kuwait to California, the burden on CBK supports a finding that exercising jurisdiction is unreasonable. 30