Sheerbonnet, Ltd. v. American Express Bank, Ltd.

Sheerbonnet, Ltd. (Sheerbonnet) (plaintiff) sold troop carriers to Hady Establishment (Hady), a Saudi Arabian company, for use during the Persian Gulf War. Hady obtained a $14,080,000 letter of credit from a Swiss bank and made a 10 percent downpayment to Sheerbonnet. Upon completion of its contractual obligations, Sheerbonnet requested that the remaining funds be paid through a wire transfer to its account at Bank of Credit and Commerce, S.A. (BCCI) in London. Considering the contract provided for payment in United States dollars, on July 3, 1991, the Swiss bank instructed its correspondent bank in New York, Northern Trust International (Northern Trust), to wire the funds to American Express Bank, Ltd. (AEB) (defendant) for credit to the BCCI-London account at AEB in New York on July 5. However, BCCI began to collapse on the morning of July 5, which resulted in a suspension of operations in London and a halt of BCCI’s operations in New York. The Federal Reserve Bank advised AEB of the situation before AEB received the wire transfer from Northern Trust. Nevertheless, AEB credited the funds to BCCI’s account. Thereafter, AEB claimed the funds in BCCI’s account as a setoff against debts owed to AEB by the insolvent BCCI. Consequently, Sheerbonnet never received payment. Sheerbonnet brought common-law and equitable claims of conversion, tortious interference with contract, and unjust enrichment, against AEB for crediting the funds to the BCCI-London account while knowing the situation surrounding BCCI’s collapse. AEB moved to dismiss Sheerbonnet’s claims for failure to state a cause of action and argued that Uniform Commercial Code (UCC) Article 4A provided the exclusive remedy for Sheerbonnet’s injury and, even if Article 4A did not preempt Sheerbonnet’s claims, the claims were legally insufficient because AEB merely followed the Swiss bank’s instructions.