Preview:

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND SAMUEL BUCHBINDER v. RONY NATANZON * * * * * * * ***** MEMORANDUM In this action Samuel Buchbinder seeks enforcement of an indemnity agreement he made with Rony Natanzon. Buchbinder and Natanzon have each filed a motion for summary judgment. Natanzon's motion will be granted, and Buchbinder's motion will be denied. I. Buchbinder and Natanzon formerly owned various business entities together. On July 12, 2002, after a dispute between them resulted in litigation, they entered into a "Memorandum of Understanding" ("MOU") to dissolve their business relationship. The MOU contained the following provision: Buchbinder and Natanzon shall own ERN Israel 50%-50% and said stock or membership ownership interests shall be promptly documented and issued to Buchbinder and Natanzon. In consideration of the immediate transfer of said Buchbinder 50% interest, Natanzon guarantees personally that he will reimburse Sam Buchbinder without offset demand or counterclaim any draw on the $1,000,000 letters of credit with all costs and attorneys fees of collection. Buchbinder had applied for the letters of credit referred to in the MOU in 2001 on behalf of an Israeli company, ERN No. 1 Ltd. ("ERN Israel"), in which he owned a 50% interest. The two letters, worth $500,000 each, were issued by Swiss bank UBS AG ("UBS") in favor of an Israeli bank, Bank Leumi, to secure certain financial obligations of ERN Israel. Under the terms of the letters, Buchbinder agreed to reimburse UBS the amount of any draw on the letters. He

Civil No. JFM-03-2945

secured this obligation by posting $318,608 in cash and 85,000 shares of stock in another company as collateral. The letters of credit were originally set to expire on January 31, 2002. Under the terms of the letters, the written consent of both Buchbinder and UBS was required to modify the expiration date. In late 2001 Bank Leumi asked UBS to extend the letters of credit to January 31, 2003, and Buchbinder agreed to the extension. UBS sent an electronic confirmation to Bank Leumi confirming an extension of the letters of credit but erroneously typed the amended expiration date as December 31, 2003, instead of January 31, 2003. On January 29, 2003, Bank Leumi notified UBS that it considered the letters of credit as valid and in force until December 31, 2003. In response, UBS advised Bank Leumi of the typographical error in the electronic notification and the correct expiration date of January 31, 2003, and asked Bank Leumi to agree to cancel the letters of credit as of January 31, 2003. Bank Leumi refused. No draws were made on the letters of credit before February 1, 2003. However, on February 5, 2003, UBS received two SWIFT messages from Bank Leumi, demanding payment on the two letters of credit. Both of the messages contained the following identical text: WE HEREBY DEMAND PAYMENT OF USD 500,000. - UNDER YOUR ABOVE STANDBY L/C. WE HEREBY STATE THAT THE AMOUNT DEMANDED REPRESENTS AN AMOUNT WHICH E.R.N. NO. 1 LTD HAS FAILED TO PAY US WHEN DUE. PLEASE CREDIT OUR ACCOUNT WITH YOU UNDER SWIFT ADVICE TO US, QUOTING OUR ABOVE REF NO. In response to the demand, UBS paid $1 million to Bank Leumi and debited Buchbinder's account by seizing the collateral. Buchbinder sought reimbursement from Natanzon pursuant to the MOU, but Natanzon refused. Buchbinder then filed suit against UBS in the United States District Court for the Northern District of Illinois alleging UBS improperly debited his account

2

because "the Letters of Credit were expired and invalid at the time of the payment on February 5, 2003." Compl. in Buchbinder v. UBS AG, No. 03-CV-2846, Stipulation, Ex. 28

Download Samuel Buchbinder v. Rony Natanzon.pdf

Maryland Law