Opinion ID: 449549
Heading Depth: 2
Heading Rank: 1

Heading: The Existence of the Letter of Credit

Text: 12 The district court found that CBK's status as beneficiary of the letter of credit was sufficient to uphold jurisdiction, relying on Wyle v. Bank Melli, 577 F.Supp. 1148 (N.D.Cal.1983). The facts in Wyle are virtually identical to those in this case. The Bank of California issued a standby letter of credit with Bank Melli, an Iranian bank, as beneficiary. The letter of credit secured certain obligations of Pacific Far East Lines (PFEL), a California corporation, to PSO, an Iranian corporation. PSO demanded payment from Bank Melli, which drew on the letter of credit. A representative of PFEL sought an injunction, which the district court granted. In upholding personal jurisdiction, the district court offered the following analysis: 13 The first and second Data Disc conditions are met here by the letter of credit transaction itself. Both PSO and Bank Melli relied on the credit of a California bank in going forward with the cargo shipping and related indemnity agreements. Implicitly, they relied on their ability to enforce the obligation of Bank of California in a California court, as the following hypothetical illustrates: Suppose PSO had made legitimate claims and Bank Melli had paid under its guarantee and sought to collect under the letter of credit, but PFEL had induced Bank of California not to pay by false representations that PSO's claims were fraudulent. Bank of California and PFEL would have been subject to suit here. Indeed, defendants argue for another purpose--limiting the relief available--that California law governs this letter of credit transaction. 14 Id. at 1160. Paccint argues that Wyle is persuasive authority in favor of upholding jurisdiction. 5 15 We decline to follow Wyle for three reasons. First, Wyle is contrary to the rule that the mere existence of a contract is insufficient to confer personal jurisdiction. We have refused, for example, to uphold personal jurisdiction over a foreign corporation, which contracted with a California corporation, when the record revealed that the defendant has not performed any act relating to the contract at issue by which it purposefully availed itself of the privilege of conducting business in California. Thos. P. Gonzalez Corp. v. Consejo Nacional de Produccion de Costa Rica, 614 F.2d 1247, 1254 (9th Cir.1980). If we accepted the analysis in Wyle, CBK could be forced to defend a suit in California even though it had never committed an affirmative act in California. Such a result would deprive CBK of due process. See Thos. P. Gonzalez, 614 F.2d at 1254. 16 Second, the analysis in Wyle assumes that the parties in a letter of credit transaction rely on their ability to enforce the letter of credit in a particular forum. In fact, the parties may anticipate enforcing the letter of credit in any one of several forums. In this case, for example, CBK could have filed suit against Paccint and Chase in Kuwait, California, Delaware, Washington, or New York. Accordingly, the factual premise of Wyle is suspect. 6 17 Third, the analysis in Wyle does not apply to the facts of this case. Paccint has not alleged that CBK participated in the selection of Chase or the decision to employ a California bank. In an affidavit, Richard Carey, who is the general manager of CBK, stated that CBK did not participate in the selection of Chase. Accordingly, the record does not support the conclusion that CBK purposefully availed itself of the privilege of conducting business in California by becoming the beneficiary of the letter of credit. 18