City of Coachella v. Harbor Real Asset Fund, Lp

MEMORANDUM

The district court correctly ruled that the demand letters did not comply with the terms of the letters of credit, and granted Harbor Real Asset Fund LP’s (“Harbor”) motion to dismiss.

The City of Coachella (“City”) brought this diversity suit in federal district court sitting in California, so California choice of law rules apply. See 389 Orange St. Partners v. Arnold, 179 F.3d 656, 661 (9th Cir.1999). California law provides that, where there is no agreement specifying the choice of law, “the liability of an issuer ... is governed by the law of the jurisdiction in which the person is located.” Cal. Com.Code § 5116(b). In this case, the issuer, Harbor, is located in Utah, and Utah law governs. Utah has adopted the Uniform Commercial Code’s provisions governing letters of credit.

“A letter of credit is issued and becomes enforceable according to its terms against the issuer when the issuer sends or otherwise transmits it to the person requested to advise or to the beneficiary.” Utah Code Ann. § 70A-5-106(l) (emphasis added). On receiving a demand for payment, the issuer performs what amounts to a ministerial evaluation of the letter of credit and the demand presented…