GP3 II LLC v. Bank of the West

GP3 II, LLC (GP3) (plaintiff) was affiliated with the general contractor for a regional water project. GP3 discussed having Litong Capital, LLC (Litong) (defendant) source materials for the project. GP3 and other financing parties obtained a standby letter of credit from JP Morgan Chase Bank in favor of Bank of the West (BOTW) (defendant) for the benefit of Litong. Under the letter, BOTW could draw on Litong’s behalf if GP3 failed to pay an invoice. Litong later claimed that GP3 had signed a contract to buy 37 miles of pipe with specified characteristics for approximately $20 million. Litong assigned its future payment rights under the alleged contract to BOTW in exchange for a partial payment of the contract amount. Litong then sent GP3 an invoice for pipe. GP3 protested that the invoice and the contract were both fraudulent. GP3 asked BOTW to terminate and surrender the letter of credit. BOTW refused. GP3 sued BOTW and Litong. GP3 sought a temporary restraining order to enjoin BOTW and Litong from drawing on the letter of credit during the lawsuit, arguing that any draw would facilitate a material fraud. GP3 presented evidence that Litong (1) had not delivered the alleged pipe and (2) could not deliver pipe meeting the contract specifications because such pipe did not exist and would require months of custom manufacturing. GP3 also offered to post a $21 million bond for possible injunction-related harm if it lost the lawsuit. In opposition, Litong presented photographs and a redacted purchase order from an unidentified manufacturer, both with significant credibility issues.