Duan & Duan Prevails on Summary Judgment in U.S. Court

On January 25, 2002, the Federal Court in the Southern District of New York found in favor of Duan & Duan's PRC client in a summary judgment motion as to liability for incorrectly releasing documents of title without collecting payment, as required. In April 1996, Duan & Duan's client ("ABC") agreed to export textile products to a U.S. corporation. For the sake of security, ABC agreed to payment via D/P (documents against payment),wherein ABC would have its bank, the Bank of China, transmit the bills of lading (title to the goods) to a collecting bank (XYZ) in the U.S. The duty of the collecting bank, XYZ, was to hold the bills of lading until payment was received from the buyer. On June 10. 1996, goods valued at USD 518,130 were shipped to New York. As agreed, plaintiff ABC sent three original bills of lading (B/Ls) to XYZ, to be released in exchange for payment - a standard method of payment in international trade transactions. After one and one half months had gone by, ABC had still received no payment confirmation, despite having been told by the buyer that the goods had arrived and had been retrieved. ABC checked with XYZ bank, who stated that they had never received the B/Ls. Both ABC and Bank of China immediately traced the shipment of the B/Ls through the courier (UPS). Their records indicated that the package was in fact received and signed for by an employee of XYZ bank. Despite numerous calls to XYZ bank to remit the payment, their requests were ignored. In the meantime, the buyer of the goods disappeared. Although they felt that XYZ bank was responsible, ABC corporation did not have the confidence that they could successfully undertake and win an international law suit, as they had no such experience. In 1998, however, ABC corporation learned of a very similar case (Shanghai Home Textile Co. vs. First National First Bank of Dona Ana County), that was handled quite successfully in the U.S. by Duan & Duan. Having learned that Duan & Duan recovered USD 2 million for Shanghai Home Textiles under very similar circumstances, they brought their case to Duan & Duan right away. Attorney Charles Q. H. Duan argued successfully that the collecting bank, XYZ, who released the B/Ls without receiving the money should had a responsibility to either collect the payment or protect the title documents. As they did neither, they were to be held liable for the value of the goods, and this was the basis for the lawsuit filed in New York. Although this seemed straightforward, the attorney for defendant XYZ put up several barriers to prevent resolution. First of all, despite the obvious signature and delivery records, XYZ denied ever receiving the B/Ls. With the cooperation of U.S. attorney Jerry Edmonds, it was successfully argued that 1) under the laws of New York, mail posted under the correct address was deemed received, and 2) if defendant XYZ believed that it didn't receive the parcel, how could the signature of its employee be explained? The judge sided with the plaintiffs ABC an determined that XYZ bank had, in fact, received the parcel. The second barrier was that the defendant claimed that XYZ had no relationship with the two parties of the purchase contract, and had no business communication with Bank of China. They claimed that it was not possible for them to be randomly appointed as the collection bank. The Bank of China's "Manual of Agent Banks" however, indicated XYZ as one of its partner banks in the U.S. Further, deposition testimony from one of XYZ's vice presidents confirmed that XYZ and Bank of China had a correspondent relationship dating back to 1985, which included the processing of D/P transactions. Attorneys for plaintiff ABC pointed out that pursuant to New York Uniform Commercial Code, a bank becomes a collecting bank as soon as they receive the bills of lading. On the other hand, if XYZ was not willing to be the collecting bank for the transaction, they are obligated to return the package to the remitting bank from which they received it, so that the bills of lading will remain protected. Given the fact that XYZ bank apparently released the B/Ls to the buyer instead (without collecting payment) brought defendant XYZ bank's motivations into question. On this question, as well, the judge found in favor of plaintiff ABC corporation. Overall, the judge found in favor of the plaintiff on all matters related to the liability of defendant XYZ. What he did defer on was the exact amount of damages that XYZ should pay to ABC. On this question, he felt there were triable issues of fact that could be decided by a jury. Although the case now moves forward on that basis, Duan & Duan is pleased that the primary issue of liability has been is now settled in favor of their client, ABC corporation.