Motion for Child Support in Aecom Technical Services, Inc. d/b/a AECOM TECHNICAL SERVICES – SUCURSAL COLOMBIA, Aecom v. Credit Agricole Cib, Itau Corpbanca Colombia S.A.| Trellis.Law

On July 25, 2023 a Motion-Secondary was filed involving a dispute between Aecom, Aecom Technical Services, Inc. D B A Aecom Technical Services Sucursal Colombia, and Credit Agricole Cib, Itau Corpbanca Colombia S.A., for Commercial - UCC - Commercial Division in the District Court of New York County.

Preview
FILED: NEW YORK COUNTY CLERK 08/24/2023 03:55 PM INDEX NO. 653558/2023
NYSCEF DOC. NO. 101 RECEIVED NYSCEF: 08/24/2023

SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK: COMMERCIAL DIVISION

AECOM TECHNICAL SERVICES, INC. (d/b/a
AECOM TECHNICAL SERVICES –
SUCURSAL COLOMBIA),

and
Index No. 653558/2023
AECOM
Hon. Andrea Masley
Plaintiffs,
Motion Sequence Nos. 001
& 003
-against-

CRÉDIT AGRICOLE CIB

and

ITAÚ CORPBANCA COLOMBIA S.A.

Defendants.

MEMORANDUM OF LAW IN SUPPORT OF MOVANT-INTERVENOR
CONCESIONARIA FERREA DE OCCIDENTE S.A.S’s MOTION TO INTERVENE
AND
OPPOSITION TO PLAINTIFFS’ APPLICATION FOR A PRELIMINARY
INJUNCTION

1 of 25
FILED: NEW YORK COUNTY CLERK 08/24/2023 03:55 PM INDEX NO. 653558/2023
NYSCEF DOC. NO. 101 RECEIVED NYSCEF: 08/24/2023

TABLE OF AUTHORITIES ..................................................................................................... iii

PRELIMINARY STATEMENT .................................................................................................1

FACTUAL BACKGROUND ......................................................................................................2

A. The Project and the Consulting Contract ..........................................................................2

ARGUMENT ..............................................................................................................................5

I. CFRO IS ENTITLED TO INTERVENE AS OF RIGHT. ................................................5
II. The Court Should Deny AECOM’s Application. .............................................................6
A. AECOM Is Not Likely To Succeed on the Merits. .....................................................6

1. AECOM has not made a sufficient shoring to enjoin the Crédit Agricole letters of
credit .........................................................................................................................7

2. Disputes regarding the Itaú letters of credit are reserved exclusively for the courts of
Bogota, Colombia; even were they before the Court and New York law, AECOM
would not be likely to succeed on the merits ...............................................................9

3. AECOM has failed to state a case for application of the fraud exception.................. 10

B. AECOM Cannot Demonstrate that It Will Suffer Irreparable Harm. ......................... 14

C. The Balance of Hardships Favors CFRO. ................................................................. 17

CONCLUSION ......................................................................................................................... 18

2 of 25
FILED: NEW YORK COUNTY CLERK 08/24/2023 03:55 PM INDEX NO. 653558/2023
NYSCEF DOC. NO. 101 RECEIVED NYSCEF: 08/24/2023

TABLE OF AUTHORITIES
Page(s)

Cases

3M Co. v HSBC Bank USA, N.A., No. 16 Civ. 5984,
2018 WL 1989563 (SDNY Apr. 25, 2018) ............................................................................ 7

410 Sixth Ave. Foods, Inc. v 410 Sixth Ave., Inc.,
197 AD 2d 435 (1st Dept 1993) ....................................................................................... 8, 11

Alaska Textile Co. v Chase Manhattan Bank, N.A.,
982 F2d 813 (2d Cir 1992) .................................................................................................... 7

All Serv. Exportacao, Importacao Comercio, S.A. v Banco Bamerindus di Brazil,
S.A.,
921 F2d32 (2d Cir 1990) ..................................................................................................... 10

Andina Coffee, Inc. v Natl. Westminster Bank,
160 AD2d 104 (1st Dept. 1990) ............................................................................................. 7

Archer Daniels Midland Co. v. JP Morgan Chase Bank N.A., No. 11 Civ. 0988
(JSR),
2011 WL 855936 (SDNY Mar. 8, 2011) .............................................................. 7, 11, 16, 17

Banque Worms, NY Branch v Banque Commerciale Privee,
679 F Supp 1173 (SDNY 1988) ....................................................................................... 9, 10

BasicNet S.p.A. v CFP Servs. Ltd.,
127 AD3d 157 (1st Dept 2015) ...................................................................................... 10, 15

Chawafaty v Chase Manhattan Bank, N.A.,
288 AD2d 58 (1st Dept 2001) ................................................................................................ 9

County of Suffolk v Love’M Sheltering, Inc.,
27 Misc 3d 1127 (Sup Ct, NY County 2010) ....................................................................... 16

Credit Agricole Indosuez v Rossiyskiy Kredit Bank,
94 NY2d 541 (2000)............................................................................................................ 16

Destiny USA Holdings, LLC v Citygroup Global Mkts. Realty Corp.,
69 AD3d 212 (1st Dept 2009) .............................................................................. 6, 11, 14, 17

Doe v Axelrod,
73 NY2d 748 (1988)............................................................................................................ 17

Fertico Belgium S.A. v Phosphate Chemicals Export Assn.,
100 AD2d 165 (1st Dept 1984) .................................................................................... 1, 2, 10

iii

3 of 25
FILED: NEW YORK COUNTY CLERK 08/24/2023 03:55 PM INDEX NO. 653558/2023
NYSCEF DOC. NO. 101 RECEIVED NYSCEF: 08/24/2023

First Commercial Bank v Gotham Originals, Inc.,
64 NY2d 287 (1985).............................................................................................................. 7

Great Wall De Venezuela, C.A. v Interaudi Bank,
117 F Supp 3d 474 (2d Cir 1992)....................................................................................... 7, 8

Heer v N. Moore St. Devs., LLC,
140 AD3d 675 (1st Dept 2016) .............................................................................................. 6

Hohenberg Co. v Comitex Knitters, Ltd.,
104 Misc 2d 232 (Sup Ct, NY County 1980) ................................................................... 8, 18

HSBC Bank USA, Natl. Assn. v Minogue,
202 AD3d 662 (2d Dept 2022) .............................................................................................. 5

Indosuez International Finance, B.V. v Natl. Reserve Bank,
304 AD2d 429 (1st Dept 2003) .............................................................................................. 9

Iroquois Master Fund Ltd. v Hyperdynamics Corp.,
2013 NY Slip Op 31311(U), (Sup Ct, NY County) ................................................................ 9

KMW Intl. v Chase Manhattan Bank, N.A.,
606 F2d 10 (2d Cir 1979) .......................................................................................... 8, 14, 15

Kvaerner U.S., Inc. v Merita Bank PLC,
288 AD2d 6 (1st Dept 2001)................................................................................................ 11

Lenox Hill Hosp. v Am. Intl. Group,
21 Misc 3d 1123(A) (Sup Ct, NY County 2008) .................................................................. 11

Magar, Inc. v Natl. Westminster Bank, USA,
189 AD2d 580 (1st Dept 1993) ............................................................................................ 11

Recon/Optical, Inc. v Govt. of Israel,
816 F2d 854 (2d Cir 1986) ............................................................................................ 11, 12

Rockwell Intl. Sys., Inc. v. Citibank, N.A.,
719 F2d 583 (2d Cir 1983) .................................................................................................. 16

Semetex Corp. v UBAF Arab Am. Bank,
835 F Supp 759 (SDNY 1994)............................................................................................. 11

SportsChannel Am. Assocs. v Natl. Hockey League,
186 AD2d 417 (1st Dept 1992) ............................................................................................ 15

TC Skyward Aviation U.S., Inc. v Deutsche Bank AG, New York Branch,
557 F Supp 3d 477 (SDNY 2021) ........................................................................ 8, 11, 15, 18

4 of 25
FILED: NEW YORK COUNTY CLERK 08/24/2023 03:55 PM INDEX NO. 653558/2023
NYSCEF DOC. NO. 101 RECEIVED NYSCEF: 08/24/2023

Twp. of Burlington v Apple Bank for Sav., No. 94 Civ. 6116 (JFK),
1995 WL 384442 (SDNY 1995) ............................................................................................ 8

Van Wagner Adv. Corp. v S&M Enters.,
67 NY2d 186 (1986)............................................................................................................ 15

Wells Fargo Bank, Natl. Assn. v McLean,
70 AD3d 676 (2d Dept 2010) ................................................................................................ 5

Other Authorities

22 NYCRR Part 202.70............................................................................................................. 20

CPLR 1012(a) ............................................................................................................................. 5

CPLR 1012(a)(3) ........................................................................................................................ 5

CPLR 1012(a)(3) and 1013 ......................................................................................................... 1

CPLR 1013 ................................................................................................................................. 5

CPLR 6301 ..................................................................................................................... 6, 15, 16

5 of 25
FILED: NEW YORK COUNTY CLERK 08/24/2023 03:55 PM INDEX NO. 653558/2023
NYSCEF DOC. NO. 101 RECEIVED NYSCEF: 08/24/2023

Intervenor Concesionaria Ferrea de Occidente S.A.S. (“CFRO”) respectfully submits this

Memorandum of Law, pursuant to CPLR 1012(a)(3) and 1013 in (i) Support of its Motion to

Intervene by way of Order to Show Cause (“Motion”) and (ii) Opposition to Plaintiffs AECOM

Technical Services, Inc. (d/b/a AECOM Technical Services – Sucursal Colombia) and AECOM

(together, “AECOM”) Application for a Preliminary Injunction (“Application”). For the reasons

set forth herein, CFRO respectfully requests that the Court grant CFRO’s Motion, deny AECOM’s

Application in its entirety, and vacate the temporary restraining order entered by the Court on July

28, 2023. (NYSCEF No. 48.)

PRELIMINARY STATEMENT
AECOM’s Application asks the Court to interfere and block CFRO’s lawful drawdown

under certain letters of credit. There is no valid basis for AECOM’s request. New York law states

that if an account holder issues a valid letter of credit, then the beneficiary need only submit a

demand in accordance with the terms. Fertico Belgium S.A. v Phosphate Chemicals Export Assn.,

100 AD2d 165, 172 (1st Dept 1984). Itaú and Crédit Agricole are contractually obligated to pay

the funds in accordance with CFRO’s demand despite the existence of a dispute related to the

underlying contract. Although not a named party, CFRO is entitled to intervene as of right

because it has a “real and substantial interest” in the outcome of this Application.

AECOM’s Complaint and corresponding attachments submit that AECOM claims FFSDI

“breached its design obligations” and issued liquidated damage demands for those alleged

breaches. In turn, FFSDI’s correspondence expressly disputes these allegations, claiming AECOM

breached the Consulting Contract in several ways and also relies on the contract’s actual terms to

support its assertions. Importantly, AECOM does not actually allege any fraud. Rather, its

allegations state a breach of the related contract, at best. AECOM relies only on these self-serving

statements (submitted with the Application) to support its claims. New York law is well settled—

6 of 25
FILED: NEW YORK COUNTY CLERK 08/24/2023 03:55 PM INDEX NO. 653558/2023
NYSCEF DOC. NO. 101 RECEIVED NYSCEF: 08/24/2023

an injunction should not be issued enjoining a letter of credit drawdown due to a dispute concerning

a related contract. See infra Part II.A (citing cases).

AECOM’s Application also must be rejected because it cannot satisfy the elements for a

preliminary injunction. First, AECOM cannot demonstrate likelihood of success on the merits

because New York courts routinely enforce letters of credit even if the account holder intends to

litigate claims against the beneficiary. Hohenberg Co. v Comitex Knitters, Ltd., 100 AD2d 165,

172 (Sup Ct, New York County 1980). Second, AECOM cannot demonstrate that it will suffer

irreparable harm because its sole damages are monetary and as such are an insufficient basis for

equitable relief. AECOM’s request for a preliminary injunction should also be rejected because it

agreed to mandatory arbitration of a dispute arising out of the parties’ agreements. Third, the

balance of hardships favors CFRO because an injunction would deprive it of its bargained-for

right. AECOM, on the other hand, would not suffer any harm by being held to its contractual

obligations. Finally, the interests of the general public also favor denying this Application which

would promote the purpose and efficiency of letters of credit—which is to facilitate trade and

promote confidence in international commerce. AECOM should not be able to prevail on an

application for preliminary injunction based upon allegations in an affidavit that state a claim for

breach of contract. If it did, virtually any account holder would be able to receive the same relief.

FACTUAL BACKGROUND
A. The Project and the Consulting Contract

This matter relates to the design and construction of a railway project in Colombia

(“Project”). See Affirmation of R. Zachary Torres-Fowler, Esq. (“Torres-Fowler Affirm.”),

Exhibit 1. (NYSCEF No. 7.) CFRO is responsible for activities related to financing, designing,

managing, and constructing the transportation system. Id. at Exhibit 1 at 2. CFRO separately

7 of 25
FILED: NEW YORK COUNTY CLERK 08/24/2023 03:55 PM INDEX NO. 653558/2023
NYSCEF DOC. NO. 101 RECEIVED NYSCEF: 08/24/2023

contracted with the consortium FFSDI to carry out the necessary design work. Id. In turn, FFSDI

and CFRO entered into a “Consulting Contract” with AECOM, wherein AECOM agreed to

provide certain design consulting services related to the Project. Id. at Exhibit 1.1

B. The Bank Guarantees

Pursuant to the Consulting Contract, AECOM agreed to issue three types of guarantees to

CFRO: (1) the Advance Payment Guarantee, (2) the Performance Guarantee, and (3) a Guarantee

of Service Quality (together, “Bank Guarantees”). Id. at Exhibit 1, Sec. 5.01(i)-(ii), (iv).

As set forth in AECOM’s Complaint, the Advance Payment Guarantee “secured the

repayment of” an advance payment issued by FFSDI to AECOM. See Compl., ¶ 24 (NYSCEF

No. 2); see also Exhibit 1, Section 5.01(i) (NYSCEF No. 7); Affidavit of Linas Grigaliunas Kongas

(“Kongas Aff.”), ¶ 28. (NYSCEF No. 5.) The Performance Guarantee secured the “fulfilment of

all the obligations of [AECOM] under the [Consulting] Contract.” See Torres-Fowler Affirm.,

Exhibit 1, Sec. 5.01(ii). (NYSCEF No. 7.) And the Guarantee of Service Quality “cover[ed] FFSDI

for the damages derived from any service provided by [AECOM] that does not comply with the

requirements of this [Consulting] Contract and that appears after [its] termination[.]” Id. at Exhibit

1, Sec. 5.01(iv).

To provide the Bank Guarantees, between July 2020 and June 2023, Crédit Agricole CIB

(“Crédit Agricole”) issued multiple Applications and Agreements for Irrevocable Standby Letters

of Credit and Demand Guaranties in favor of CFRO and FFSDI, pursuant to a Credit Facility

Agreement between AECOM and Crédit Agricole. See Torres-Fowler Affirm., Exhibits 6-8.

(NYSCEF Nos. 12, 13, 14.) In connection with this arrangement, Crédit Agricole requested that

1
As AECOM acknowledges, AECOM entered into a contract, through its Colombian branch,
with Chinese and Colombian entities for a project in Colombia. That contract, the Consulting
Contract, by its terms is governed by Colombian law.
3

8 of 25
FILED: NEW YORK COUNTY CLERK 08/24/2023 03:55 PM INDEX NO. 653558/2023
NYSCEF DOC. NO. 101 RECEIVED NYSCEF: 08/24/2023

[Itaú Corpbanca Colombia S.A. (“Itaú”)] issue several guarantees for the same value “to the

ultimate beneficiary, CFRO[.]” See Compl., ¶ 26 (NYSCEF No. 2) ; see also Affirmation of Dolly

Murcia Borja (“Borja Affirm.”), ¶¶ 7, 13. (NYSCEF No. 66.) Itaú complied with this request by

issuing eight guarantees for the benefit of CFRO. See Borja Affirm., id. ¶ 7; see also Torres-

Fowler Affirm., Exhibit 10 (NYSCEF No. 16).

Itaú’s guarantees require it to pay CFRO any amount up to the maximum “without obliging

[CFRO] to establish or prove [its] demand, and without [it] having to first demand payment from

[AECOM].” See id., Exhibit 10, Sec. 2. Should a demand for payment under a guarantee be

presented to Itaú by CFRO, Itaú is then authorized to draw upon the corresponding Crédit Agricole

letter of credit. See Borja Affirm., ¶ 14 (NYSCEF No. 66).

C. FFSDI and AECOM’s Contract Dispute

On February 24, 2023, FFSDI sent a letter to AECOM informing them that the Consulting

Contract would expire on its termination date, February 25, 2023, and that FFSDI did not intend

to extend its duration. See Torres-Fowler Affirm., Exhibit 18.2 (NYSCEF No. 24.)

2
The parties subsequently exchanged several letters outlining various contractual disputes.
For example, AECOM alleges that FFSDI breached its obligations by failing to deliver necessary
design inputs. However, Change Order No. 19 requires AECOM to proceed with its designs
regardless of whether the inputs are received. See Torres-Fowler Affirm., Exhibit 11, p. 3 (“If any
of the inputs [ ] are not provided in full by the indicated date . . . AECOM shall move forward and
complete the designs with the information available at the time”). (NYSCEF No. 17.)
AECOM also takes issue with liquidated damages FFSDI seeks to recover. The Consulting
Contract explicitly permits FFSDI to seek liquidated damages against AECOM for various
material and non-material breaches. See Torres-Fowler Affirm., Exhibit 1, Section 6.01. Although
these liquidated damages are generally subject to a cap of 20% of the Consulting Contract value;
this cap does not apply when the breaches are the result of AECOM’s “gross negligence or willful
misconduct.” Id. at Exhibit 1, Sections 6.01(3), (5). (NYSCEF No. 7)
FFSDI has explained the basis for the liquidated damages to AECOM, including the
breaches it believes were the result of gross negligence and/or willful misconduct. See, e.g., id. at
Exhibit 26. (NYSCEF No. 32.)

9 of 25
FILED: NEW YORK COUNTY CLERK 08/24/2023 03:55 PM INDEX NO. 653558/2023
NYSCEF DOC. NO. 101 RECEIVED NYSCEF: 08/24/2023

After discussions between the parties,3 on July 18, 2023, CFRO presented Itaú with written

demands for payment under five of the eight guarantees Itaú issued (“Demands”). See Borja

Affirm, ¶ 15. (NYSCEF No. 66.) As confirmed in Itaú’s filing, each of the Demands “facially

complies with the requirements . . . under the associated Guarantee.” Id. After receiving the

Demands, on July 21, 2023, Itaú states that it issued written demands for payment to Crédit

Agricole under the associated letters of credit.

ARGUMENT
I. CFRO IS ENTITLED TO INTERVENE AS OF RIGHT.

CFRO is entitled to intervene in this action as of right or, in the alternative, by permission

of the Court, because its interest in the relevant guarantees and Demands are at issue.

“Upon a timely motion, a person is permitted to intervene as of right in an action involving

the disposition of property where that person may be adversely affected by the judgment.” (Wells

Fargo Bank, Natl. Assn. v McLean, 70 AD3d 676, 676 (2d Dept 2010) (citing CPLR 1012(a)(3)).

In addition, courts have discretion to permit a person to intervene, inter alia, “when the person's

claim or defense and the main action have a common question of law or fact.” See CPLR 1013.

“Whether intervention is sought as a matter of right under CPLR 1012(a), or as a matter of

discretion under CPLR 1013, is of little practical significance, since intervention should be

permitted where the intervenor has a real and substantial interest in the outcome of the

proceedings.” HSBC Bank USA, Natl. Assn. v Minogue, 202 AD3d 662, 663 (2d Dept 2022).

3
The disputes arising from the Consulting Contract are subject to the Consulting Contract’s
dispute resolution provision, which ultimately provides for ICC arbitration should discussions
between the parties and mediation fail to resolve the disputes. CFRO’s intervention in this action
is not intended and should not be deemed a waiver of its rights under the Consulting Contract
dispute resolution provision, including the arbitration of disputes between the parties to the
Consulting Contract.
5

10 of 25
FILED: NEW YORK COUNTY CLERK 08/24/2023 03:55 PM INDEX NO. 653558/2023
NYSCEF DOC. NO. 101 RECEIVED NYSCEF: 08/24/2023

There can be no question here that CFRO has “a real and substantial interest” in the

outcome of this preliminary injunction application. It is the ultimate beneficiary of the Demands

and must be permitted to assert its rights in the funds by opposing the Application.

Given that this is an injunction application and CFRO solely seeks to intervene to oppose

the injunction, CFRO, in lieu of a proposed answer, CFRO submits the sworn Affirmation of Mr.

Xia Qingtao setting out CFRO’s position regarding AECOM’s allegations and arguments. See,

e.g., Heer v N. Moore St. Devs., LLC, 140 AD3d 675, 676 (1st Dept 2016) (finding that a movant-

intervenor’s “failure to include a proposed pleading in its motion papers does not warrant denial

of the motion since the affidavit submitted sets forth its position on the [dispute] and [the opposing

party] is not prejudiced by the omission of the pleading”).

II. THE COURT SHOULD DENY AECOM’S APPLICATION.

The Court should deny AECOM’s Application because AECOM cannot establish a

likelihood of success on the merits, irreparable harm, or that the balance of equities weighs in its

favor. See CPLR 6301; Destiny USA Holdings, LLC v Citygroup Global Mkts. Realty Corp., 69

AD3d 212, 216 (1st Dept 2009) (providing that the party seeking the injunction must establish, by

clear and convincing evidence: (1) a likelihood or probability of success on the merits, (2)

irreparable harm in the absence of an injunction, and (3) a balance of the equities in favor of

granting the injunction).

A. AECOM Is Not Likely To Succeed on the Merits.

The transactions AECOM seeks to enjoin are (1) Itaú’s draw on demand letters of credit

issued to it by Crédit Agricole and (2) CFRO’s draw on a demand letters of credit issued to CFRO

by Itaú. AECOM is not likely to succeed on the merits as to either set of transactions because the

transactions are facially conforming draws on validly issued letters of credit and AECOM has

failed to allege facts sufficient to trigger the fraud exception to enforcement of draw requests.

11 of 25
FILED: NEW YORK COUNTY CLERK 08/24/2023 03:55 PM INDEX NO. 653558/2023
NYSCEF DOC. NO. 101 RECEIVED NYSCEF: 08/24/2023

A letter of credit is an “irrevocable promise to pay the [ ] beneficiary when [it] presents

certain documents . . . that conform with the terms of the credit [letter].” Alaska Textile Co. v

Chase Manhattan Bank, N.A., 982 F2d 813, 815 (2d Cir 1992) (citing First Commercial Bank v

Gotham Originals, Inc., 64 NY2d 287, 294-95 (1985)). Indeed, “New York law . . . requires strict

compliance with facially valid requests for payment under a letter of credit.” Archer Daniels

Midland Co. v. JP Morgan Chase Bank N.A., No. 11 Civ. 0988 (JSR), 2011 WL 855936, at *4

(SDNY Mar. 8, 2011). This is true “regardless of what occurs in the related transaction.” 3M

Co. v HSBC Bank USA, N.A., No. 16 Civ. 5984, 2018 WL 1989563, at *8 (SDNY Apr. 25, 2018)

(quoting Alaska Textile v Chase Manhattan Bank, N.A., 982 F2d 813, 815 (2d Cir 1992)); Great

Wall De Venezuela, C.A. v Interaudi Bank, 117 F Supp 3d 474, 485 (2d Cir 1992) (“[t]he issuing

bank may not refuse payment for reasons related to its contract with the applicant or the underlying

contract between the beneficiary and the applicant”).

1. AECOM has not made a sufficient shoring to enjoin the Crédit Agricole letters of
credit

As to Itaú’s draw on demand letters of credit issued to it by Crédit Agricole, AECOM has

not even attempted to make a showing as to why the draw should be denied. “To draw on a letter

of credit, the beneficiary need only establish that it has strictly complied with its essential

requirements.” Andina Coffee, Inc. v Natl. Westminster Bank, 160 AD2d 104, 109 (1st Dept. 1990).

Itaú should be allowed to draw on the Crédit Agricole letters of credit. AECOM does not

dispute that the letters of credit were validly issued or that Itaú was the beneficiary. AECOM does

not dispute that Itaú’s demand facially conformed with the letters of credit.

Letters of credit, of course, are frequently used in transactions as collateral for related

contracts. Cross allegations of breaches of those related contracts, of course, are generally the

context in which calls on that collateral are made. New York law, however, recognizes that it is

12 of 25
FILED: NEW YORK COUNTY CLERK 08/24/2023 03:55 PM INDEX NO. 653558/2023
NYSCEF DOC. NO. 101 RECEIVED NYSCEF: 08/24/2023

vital to ensure the independence of letters of credit from alleged breaches of related contracts. See

Great Wall, 117 F Supp 3d at 485; 410 Sixth Ave. Foods, Inc. v 410 Sixth Ave., Inc., 197 AD 2d

435, 436 (1st Dept 1993). “This independence principle is predicated upon the fundamental policy

that a letter of credit would lose its commercial vitality if . . . the issuer could look beyond the

terms of the credit to the underlying contractual controversy or performance between its customer

and the beneficiary.” Twp. of Burlington v Apple Bank for Sav., No. 94 Civ. 6116 (JFK), 1995

WL 384442, at *5 (SDNY 1995) (citing KMW Intl. v Chase Manhattan Bank, N.A., 606 F2d 10,

16 (2d Cir 1979)). Further, New York courts routinely reject application to enjoin draws on letters

of credit where the application is premised on allegations of breach of a related contract.

Regardless of which party is ultimately adjudged to have breached the related contract, the

party that contracted for letter of credit collateral is entitled to draw on that letter of credit, even

pending resolution of the larger related contract dispute. To hold otherwise would “deprive the

beneficiary of the very benefit for which he bargained, namely that any such underlying

contract dispute will be resolved while he is in possession of the money.” TC Skyward Aviation

U.S., Inc. v Deutsche Bank AG, New York Branch, 557 F Supp 3d 477, 488 (SDNY 2021) (internal

quotation marks omitted); see also Hohenberg Co. v Comitex Knitters, Ltd., 104 Misc 2d 232, 235

(Sup Ct, NY County 1980) (noting that, by entering into an international transaction, “assumes the

business risks . . . . includ[ing] the possibility that even if a dispute about performance of the

underlying contract should arise . . . [the disputed] funds would be paid out under the irrevocable

letter of credit and held in foreign hands”) (quoting KMW Intl., 606 F2d at 15).

Further, AECOM cannot transform allegations of various breaches of contract by FFSDI

to invoke the fraud exception to enjoin Itaú’s draw on the Crédit Agricole letter of credit. This is

because FFSDI’s actions cannot serve as a basis for invoking the fraud exception against Itaú. The

13 of 25
FILED: NEW YORK COUNTY CLERK 08/24/2023 03:55 PM INDEX NO. 653558/2023
NYSCEF DOC. NO. 101 RECEIVED NYSCEF: 08/24/2023

fraud exception “is limited to situations in which the wrongdoing of the beneficiary has permeated

the entire transaction.” Banque Worms, NY Branch v Banque Commerciale Privee, 679 F Supp

1173, 1182 (SDNY 1988). AECOM, however, has not alleged any fraudulent representation, any

fraudulent omissions, or any misconduct by the beneficiary of the Crédit Agricole letters of credit,

Itaú.

As a result of AECOM’s failure to make any showing to support enjoining the Crédit

Agricole letters of credit, AECOM is not likely to succeed on the merits.

2. Disputes regarding the Itaú letters of credit are reserved exclusively for the courts
of Bogota, Colombia; even were they before the Court and New York law,
AECOM would not be likely to succeed on the merits

As to CFRO’s draw on the Itaú letters of credit, AECOM ignores the governing law and

forum provisions of the letters of credit. By their terms, the letters of credit are governed by the

“laws of the Republic of Colombia,” Ex. 10, ¶ 7 (NYSCEF No. 16), and “[e]xclusive legal

jurisdiction” relating to them “or any matter stemming therefrom” is reserved for “the competent

courts of the City of Bogota,” Id. ¶ 8. 4 Moreover, the dispute Itaú letters of credit “lacks a

substantial connection to New York and would be burdensome to its courts.” Chawafaty v Chase

Manhattan Bank, N.A., 288 AD2d 58, 58 (1st Dept 2001) (affirming grant of motion forum non

conveniens).

4
Although AECOM is not a signatory to the Itaú letters of credit, “forum selection clauses
bind non-signatories if they are ‘sufficiently close in their relation’ to the signatory or the dispute.”
Iroquois Master Fund Ltd. v Hyperdynamics Corp., 2013 NY Slip Op 31311(U), * 7 (Sup Ct, NY
County) (quoting Indosuez International Finance, B.V. v Natl. Reserve Bank, 304 AD2d 429, 431
(1st Dept 2003)). Here, AECOM is significantly close to the dispute, as the letters of credit were
issued ultimately at AECOM’s instigation and to fulfill part of AECOM’s obligations to FFSDI in
the Consulting Contract, and AECOM has brought the instant action in an effort to enjoin the same
letters of credit in which the forum selection clause is found.

14 of 25
FILED: NEW YORK COUNTY CLERK 08/24/2023 03:55 PM INDEX NO. 653558/2023
NYSCEF DOC. NO. 101 RECEIVED NYSCEF: 08/24/2023

However, even assuming arguendo, that the forum selection clause were not enforceable

against AECOM and New York law applied, AECOM would not be likely to succeed on the merits,

as the above analysis of the Crédit Agricole letters of credit likewise applies here.

The analysis is straightforward:

 AECOM does not dispute that the letters of credit were validly issued or that CFOR

was the beneficiary.

 AECOM does not dispute that CFOR’s demand facially conformed with the letters

of credit.

 The demand should be honored.

AECOM fails to allege fraudulent representations, omissions, or conduct against the actual

beneficiary of the letters of credit, CFRO, which defeats application of the fraud exception. Cf.

Banque Worms, 679 F Supp at 1182.

As a result, AECOM is not likely to succeed on the merits as to the Itaú letters of credit.

3. AECOM has failed to state a case for application of the fraud exception

AECOM acknowledges a bank’s near-absolute requirement to honor conforming demands,

but attempts to shoe-horn its breach of contract allegations into a basis for asserting the fraud

exception. Such efforts are routinely made to frustrate the purpose of letters of credit and routinely

rejected by New York courts. See BasicNet S.p.A. v CFP Servs. Ltd., 127 AD3d 157, 171 (1st Dept

2015).

Although there is an exception to payment on demand on a letter of credit, it is a “narrow”

one with an exceedingly high bar. See All Serv. Exportacao, Importacao Comercio, S.A. v Banco

Bamerindus do Brazil, S.A., 921 F2d 32, 35 (2d Cir 1990). This exception is based on fraud and

may only be applied “upon a strong showing that the request for payment was fraudulently made.”

15 of 25
FILED: NEW YORK COUNTY CLERK 08/24/2023 03:55 PM INDEX NO. 653558/2023
NYSCEF DOC. NO. 101 RECEIVED NYSCEF: 08/24/2023

Archer Daniels, 2011 WL 855936, at *5 (citing Semetex Corp. v UBAF Arab Am. Bank, 835 F

Supp 759, 774 (SDNY 1994)). It requires a showing of “an outright fraudulent practice.”

Semetex Corp., 853 F Supp at 773-74 (emphasis added); see also 410 Sixth Ave., 197 AD 2d at

436 (“fraud in the transaction is limited to instances of active intentional fraud”). AECOM bears

the burden to demonstrate that the draw demand is not colorable, that the “beneficiary’s [demand]

is clearly untenable” with “no basis in fact.” TC Skyward, 557 F Supp 3d at 487 (emphasis

added). Further, AECOM must make this strong showing of outright fraud on clear and convincing

evidence. See Destiny USA, 669 AD3d at 216.

AECOM does not meet this standard. “[A] difference of opinion regarding the

beneficiary’s rights and obligations in an underlying contract, [is] insufficient to show fraud in the

transaction.” TC Skyward, 557 F Supp 3d at 488.

New York courts routinely reject applications to enjoin a letter of credit drawdown

premised on allegations of breach of a related contract. See, e.g., Lenox Hill Hosp. v Am. Intl.

Group, 21 Misc 3d 1123(A), *5 (Sup Ct, NY County 2008) (denying an injunction where an

insured claimed a defendant-insurer fabricated financial figures to obtain a higher premium

because this was “evidence of a contract dispute . . . but [ ] does not tend to show active, intentional

fraud”); Kvaerner U.S., Inc. v Merita Bank PLC, 288 AD2d 6, 6 (1st Dept 2001) (affirming refusal

to enjoin bank preliminarily from honoring demand on letter of credit because the record “at best

. . . merely supports allegations of breach of contract, not fraud, and a such is insufficient to justify

enjoining payment of the letter of credit”); Magar, Inc. v Natl. Westminster Bank, USA, 189 AD2d

580, 581 (1st Dept 1993) (same); 410 Sixth Ave., 197 AD2d at 436 (same); Recon/Optical, Inc. v

Govt. of Israel, 816 F2d 854, 858 (2d Cir 1986) (rejecting fraud defense where applicant and

beneficiary disputed specific contract terms).

16 of 25
FILED: NEW YORK COUNTY CLERK 08/24/2023 03:55 PM INDEX NO. 653558/2023
NYSCEF DOC. NO. 101 RECEIVED NYSCEF: 08/24/2023

Despite this body of law, AECOM’s papers present only disputed allegations of breach of

contract. AECOM insists that, despite the evident controversy between AECOM and FFSDI,

AECOM properly performed the Consulting Contract and FFSDI did not. See, e.g., Compl., ¶ 5

(NYSCEF No. 2) (“FFSDI failed to provide [design inputs] in a timely manner”); id. at ¶ 54

(explaining that the liquidated damages were “the product of FFSDI’s failure to supply complete

and timely design information”). These allegations are insufficient to demonstrate “an outright

fraudulent practice” or that CFRO’s Demands are “untenable” and without basis. At best, they

show there is a dispute of fact between the parties about the performance of the Consulting

Contract, which should be resolved in arbitration, as the parties had agreed in the Consulting

Contract’s dispute resolution provision.

Although it is not the Court’s charge to hear or resolve these contract disputes, AECOM’s

efforts to convert these allegations into fraud fails because the allegations are disputed and

unavailing. Reserving its rights, CFRO addresses them briefly below.

a. CFRO Lawfully Demanded the Remainder of the Advance Payment
from the Advance Payment Guarantee.

Despite AECOM’s allegations, CFRO lawfully demanded the remainder of the Advance

Payment from the Advance Payment Guarantee.

AECOM voluntarily issued the Advance Payment Guarantee to “secure[] the repayment of

FFSDI’s advance payment to AECOM.” See Compl., ¶ 24 (NYSCEF No. 2); see also Torres-

Fowler Affirm., Exhibit 1, Section 5.01(i) (NYSCEF No. 7); Kongas Aff., ¶ 28 (NYSCEF No. 5).

CFRO attempted to draw on this Bank Guarantee as intended—to ensure “repayment of [the]

advanced payment.” See ReconOptical, 816 F2d at 858 (enforcing a letter of credit where the

“circumstances [were] entirely consistent with the parties’ contractual intent”).

17 of 25
FILED: NEW YORK COUNTY CLERK 08/24/2023 03:55 PM INDEX NO. 653558/2023I
NYSCEF DOC. NO. 101 RECEIVED NYSCEF: 08/24/2023

b. The Parties’ Disagreement Over Liquidated Damages is a Contractual
Dispute.

Disputes over contractual interpretation and disputed facts are contract disputes, not fraud,

as evidenced by AECOM’s assertions regarding liquidated damages.

AECOM argues that CFRO cannot demand payment for liquidated damages that FFSDI

caused by failing to provide design inputs. Change Order No. 19, cited by AECOM, states that

FFSDI would provide design inputs, but it did not condition AECOM’s work on the receipt of

these inputs. Rather, it says, “[i]f any of the inputs [ ] are not provided . . . AECOM shall move

forward and complete the designs with the information available at the time.” See Torres-

Fowler Affirm., Exhibit 11, p. 3 (emphasis added) (NYSCEF No. 17).

AECOM argues the liquidated damages claimed by FFSDI impermissibly exceeds the 20%

limitation. This argument ignores the terms of the Consulting Contract, which permit exceeding

the 20% cap if AECOM’s breach is “derived from one or more actions with gross negligence or

willful misconduct.” See Torres-Fowler Affirm., Exhibit 1, Sec. 6.01(5)(b). (NYSECF No. 7.)

Significantly, FFSDI’s June 30, 2023 correspondence stated that at least two of the material

breaches “were due to gross negligence and willful misconduct[.]” See Torres-Fowler Affirm.,

Exhibit 26, ¶¶ 4.6.1, 4.6.2. (NYSCEF No. 32.) Indeed, although AECOM is free to dispute the

issue of liquidated damages at arbitration, CFRO’s June 30, 2023 correspondence, attached to

AECOM’s Application, sets forth FFSDI’s factual and contractual basis for asserting the liquidated

damages. See Torres-Fowler Affirm., id., Exhibit 26.

c. Timing, Scheduling, Input, and Scope Disputes are Garden-Variety
Contract Disputes

AECOM also asserts its position regarding a handful of timing, scheduling, input delivery,

and scope disputes, all of which are garden-variety for any significant design or construction

contract and performance thereunder. In arbitration, AECOM will have the opportunity to make

18 of 25
FILED: NEW YORK COUNTY CLERK 08/24/2023 03:55 PM INDEX NO. 653558/2023
NYSCEF DOC. NO. 101 RECEIVED NYSCEF: 08/24/2023

its case, and the arbitral tribunal will decide the relevant disputes of fact, law, and contractual

interpretation.

Nothing in AECOM’s assertion of these contract disputes or of those in sections a. and b.

immediately above describes anything more than the type of contract litigation routine to design

projects. AECOM has failed to make the demonstration necessary to meet the fraud exception.

d. The Court Cannot Issue an Injunction to Prevent “Anticipated
Conduct”

AECOM asks that the Court enjoin “future draws on the Quality Guarantees” even though

CFRO has not yet made any such demand. The Court should reject this request for several reasons.

Initially, AECOM relies on the same deficient arguments mentioned above, which do not

demonstrate an “outright fraudulent

Case Info

Judge

Andrea Masley Track Judge’s New Case

Case No.

(Subscribe to View)

Document Filed Date

August 24, 2023

Case Filing Date

July 25, 2023

County

Parties

AECOM Plaintiff
AECOM TECHNICAL SERVICES, INC. d/b/a AECOM TECHNICAL SERVICES SUCURSAL COLOMBIA Plaintiff
BERGER, DAVID ADAM Attorney for the Defendant
Concesionaria Ferrea De Occidente S.A.S Non Party
CREDIT AGRICOLE CIB Defendant
ITAU CORPBANCA COLOMBIA S.A. Defendant
LANDIS, BRIELLE ERICA Attorney for the Plaintiff
OBERDIER, CARL W Attorney
RESETARITS, JEFFREY JASON Attorney for the Defendant
RESSMEYER, KELLEN GRACE Attorney
STUCKEY, SAMUEL ADAMS Attorney for the Defendant
TORRES-FOWLER, ROBERT ZACHARY Attorney for the Plaintiff

For full print and download access, please subscribe at https://www.trellis.law/.

Motion-Secondary: Aecom Technical Services, Inc. d/b/a AECOM TECHNICAL SERVICES – SUCURSAL COLOMBIA, Aecom v. Credit Agricole Cib, Itau Corpbanca Colombia S.A.

Preview

Related Topics

Case Info

Parties