Consolidated Electrical Distributors, Inc. v. United Renewable Energy Co., Ltd.

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 CONSOLIDATED ELECTRICAL Case No.: 23-CV-2353 TWR (DEB) DISTRIBUTORS, INC., a Delaware 12 corporation, ORDER DENYING PLAINTIFF’S EX 13 PARTE APPLICATION FOR Plaintiff, (1) TEMPORARY RESTRAINING 14 v. ORDER, AND (2) ORDER TO SHOW 15 CAUSE WHY PRELIMINARY UNITED RENEWABLE ENERGY CO., INJUNCTION SHOULD NOT ISSUE 16 LTD., a Taiwanese corporation dba

URECO; BANK OF AMERICA, National 17 (ECF No. 3) Association, a corporation, 18 Defendants. 19

20 Presently before the Court are Plaintiff Consolidated Electrical Distributors, Inc.’s 21 Ex Parte application for (1) Order to Show Cause Why a Preliminary Injunction Should 22 Not Issue and (2) Temporary Restraining Order (“TRO”) (ECF No. 3, “Ex Parte Mot.”); 23 Plaintiff’s Memorandum of Points and Authorities in support of its Ex Parte Motion (ECF 24 No. 3-1, “Mem.”); Defendant United Renewable Energy Co.’s (“URECO”) Opposition to 25 Plaintiff’s Ex Parte Motion (ECF No. 15, “Opp’n”); Plaintiff’s Reply to URECO’s 26 Opposition (ECF No. 16, “Reply”); URECO’s Surreply in support of its Opposition (ECF 27 No. 23, “Surreply”); and Bank of America’s (“BOA”) Response to Ex Parte Motion (ECF 28 No. 14, “BOA Resp.”). The Court held a hearing on January 25, 2024. (See ECF No. 24 1 (the “Jan. 25 Hearing”).) Having reviewed the Parties’ submissions and the relevant law, 2 the Court DENIES the Ex Parte Motion. 3 BACKGROUND 4 On December 28, 2020, Plaintiff entered into a non-exclusive Distribution 5 Agreement with URECO, a Taiwanese corporation that manufactures and sells solar 6 panels. (Compl. ¶ 8; see also id. Ex. 1 (Distribution Agreement).) The Distribution 7 Agreement contained, among other things, a price protection provision that entitled 8 Plaintiff to a rebate for the price difference on any products purchased from URECO within 9 a specific time frame. (Id. ¶ 10.) 10 On January 1, 2022, the Parties amended the Distribution Agreement (the “First 11 Amendment”). (Id. ¶ 13; see also id. Ex. 2 (First Amendment).) The First Amendment 12 required Plaintiff to obtain a standby letter of credit to cover Plaintiff’s credit line with 13 URECO. (Id. ¶ 16.) Accordingly, Plaintiff obtained an Irrevocable Letter of Credit (the 14 “LOC”) from BOA for $35,000,000 on July 19, 2022. (Id. ¶ 17; see also id. Ex. 3 (LOC).) 15 In early 2022, the Parties grew concerned over the U. S. government’s plan to impose 16 tariffs on foreign solar panels. (Opp’n at 2.) Because these tariffs could create “a risk of 17 great loss” to it, URECO sent a letter, dated April 12, 2022, to Plaintiff, in which URECO 18 proposed higher prices for products that arrived or were arriving at U.S. ports after 19 March 30, 2022, but agreed to give Plaintiff a rebate if the tariff did not go into effect and 20 the right to cancel certain orders (the “April 12 Letter”). (Compl. ¶¶ 19–20; see also id. 21 Ex. 4 (the April 12 Letter).) Specifically, the April 12 Letter provides: 22 1. Raise price of $0.10 usd/w (10 cents/watt) to all modules arrived and 23 arriving to US ports after 2022/03/30. 2. URECO will return 40% rebate of the difference between the actual, if 24 lower, and $0.10 usd/w (10 cents/watt). 25 3. If by any chance the tariff is over the raised price, 10 cents/watt, we will not return the raised price, 3% rebate and 0.25% marketing rebate 26 back to CED Greentech since URECO is at a loss. 27 4. Any product on the water or arrived in the U.S cannot be canceled and will apply to this agreement until further clarification. 28 1 It is the last of these provisions that is central to the instant dispute. For its part, 2 Plaintiff considers the April 12 Letter a “Second Amendment” to the Distribution 3 Agreement. (Compl. ¶ 20.) Plaintiff takes the position that it agreed to the higher pricing 4 in return for URECO’s agreement that Plaintiff could cancel, without penalty, some open 5 and future purchase orders for goods that URECO had not shipped to the United States and 6 that had not left their point of origin. (Compl. ¶ 19; see also ECF No. 3-2 (Declaration of 7 Daniel Fadden (“Fadden Decl.”)) ¶ 16.) URECO, on the other hand, considers the April 12 8 Letter a “side agreement.” (ECF 15-1 (Declaration of Chienping Hsieh (“Hsieh Decl.”)) 9 ¶ 4.) URECO states the terms of the April 12 Letter were in effect only during the period 10 when the higher price was in effect and any cancellation right that might have existed under 11 the April 12 Letter ended on June 6, 2022, when President Biden announced a two-year 12 moratorium on solar panel tariffs. (Opp’n at 25.) 13 On December 11, 2023, URECO’s counsel sent Plaintiff’s counsel numerous 14 invoices totaling $37,308,345.00 with twenty-one-day payment terms. (Compl. ¶ 28.) 15 Plaintiff contends all the invoices received from URECO on that date concern orders 16 canceled under the Second Amendment and URECO failed to deliver the materials 17 described in the orders to Plaintiff. (Id.) To prove that it had the cancellation rights, 18 Plaintiff points to email communications between Plaintiff’s and URECO’s agents between 19 November 28, 2022, and January 10, 2023—after the supposed June 6, 2022 expiration of 20 Plaintiff’s cancellation rights—seeking cancellation of thirty containers of goods. (Fadden 21 Decl. ¶ 22–23; see also Fadden Decl. Ex. 5.) URECO takes the position that even though 22 it accepted the cancellation of thirty-nine (not thirty, as Plaintiff states) containers of goods 23 on that occasion, it had refused to accept Plaintiff’s request on others. (Hsieh Decl. ¶ 6.) 24 In support, URECO has provided a June 13, 2023 email, in which it refused to accept a 25 cancellation request from Plaintiff. (Hsieh Decl. Ex. 9.) URECO further clarifies that it 26 never requested that Plaintiff take delivery of those thirty-nine containers and that it is not 27 pursuing payment for them either. (Hsieh Decl. ¶ 6.) Instead, it seeks payment for two 28 / / / 1 hundred and twenty-eight containers of goods, valued at more than $37 million, that are 2 sitting in a U.S. warehouse because Plaintiff has refused to accept delivery. (Id. ¶ 7.) 3 On January 5, 2024, believing URECO would imminently draw on the $35,000,000 4 LOC from BOA, Plaintiff filed the instant Ex Parte Motion to temporarily enjoin BOA 5 from making any payments to URECO under the LOC. (Mem. at 7.) In the meantime, 6 URECO agreed not to seek payment from BOA until January 26, 2024, after the hearing 7 scheduled in this matter. (ECF No. 18 at 2.) BOA takes no position regarding the 8 underlying contract dispute and submits to the Court’s decision. (See BOA Resp. at 2.) 9 LEGAL STANDARD 10 Federal Rule of Civil Procedure 65 authorizes a trial judge to grant a TRO under 11 certain circumstances “to preserve the status quo and the rights of the parties until a final 12 judgment issues in the cause.” See Ramos v. Wolf, 975 F.3d 872, 887 (9th Cir. 2020) 13 (quoting U.S. Philips Corp. v. KBC Bank N.V., 590 F.3d 1091, 1094 (9th Cir. 2010)). “A 14 preliminary injunction [or temporary restraining order] . . . is not a preliminary 15 adjudication on the merits[,] but rather a device for preserving the status quo and preventing 16 the irreparable loss of rights before judgment.” Id. (alteration in original) (quoting Sierra 17 On-Line, Inc. v. Phx. Software, Inc., 739 F.2d 1415, 1422 (9th Cir. 1984)). The status quo 18 in this context “refers not simply to any situation before the filing of a lawsuit, but instead 19 to ‘the last uncontested status which preceded the pending controversy[.]’” See GoTo.com, 20 Inc. v. Walt Disney Co., 202 F.3d 1199, 1210 (9th Cir. 2000) (quoting Tanner Motor Livery, 21 Ltd. v. Avis, Inc., 316 F.2d 804, 809 (9th Cir. 1963)). 22 “The standard for issuing a temporary restraining order is identical to the standard 23 for issuing a preliminary injunction.” Lockheed Missile & Space Co. v. Hughes Aircraft 24 Co., 887 F. Supp. 1320, 1323 (N.D. Cal. 1995). “A party seeking a preliminary injunction 25 must meet one of two variants of the same standard.” Ramos, 975 F.3d at 887 (quoting All. 26 for Wild Rockies v. Pena, 865 F.3d 1211, 1217 (9th Cir. 2017)). 27 / / / 28 / / / 1 Under the original standard, plaintiffs seeking a preliminary injunction must establish that: (1) they are likely to succeed on the merits; (2) they are likely 2 to suffer irreparable harm in the absence of preliminary relief; (3) the balance 3 of equities tips in their favor; and (4) an injunction is in the public interest.

4 Id. (citing Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20 (2008)). “The Ninth Circuit 5 employs an alternative ‘serious questions’ standard, also known as the ‘sliding scale’ 6 variant of the Winter standard.” Id. (citing All. for Wild Rockies v. Cottrell, 632 F.3d 1127, 7 1134 (9th Cir. 2011)). 8 Under this alternate standard, [the court] weigh[s] the preliminary injunction 9 factors on a sliding scale, such that where there are only serious questions going to the merits—that is, less than a likelihood of success on the merits— 10 a preliminary injunction may still issue so long as the balance of hardships 11 tips sharply in the plaintiff’s favor and the other two factors are satisfied.

12 Id. at 887–88 (internal quotation marks omitted) (quoting Short v. Brown, 893 F.3d 671, 13 675 (9th Cir. 2018)). In other words, “[a] preliminary injunction may be granted . . . where 14 the moving party demonstrates either ‘(1) a combination of probable success on the 15 merits and the possibility of irreparable injury or (2) the existence of serious questions 16 going to the merits and that the balance of hardships tips sharply in [its] favor.’” Grocery 17 Outlet Inc. v. Albertson’s Inc., 497 F.3d 949, 951 (9th Cir. 2007) (emphasis and second 18 alteration in original) (quoting Sardi’s Rest. Corp. v. Sardie, 755 F.2d 719, 723 (9th Cir. 19 1985)). 20 A preliminary injunction is an “extraordinary remedy that may only be awarded 21 upon a clear showing that the plaintiff is entitled to such relief.” Winter, 555 U.S. at 22. 22 Consequently, there are several limitations on when “[t]he court may issue a temporary 23 restraining order without written or oral notice to the adverse party or its attorney,” see 24 Fed. R. Civ. P. 65(b), and “[t]he court may issue a . . . temporary restraining order only if 25 the movant gives security in an amount that the court considers proper to pay the costs and 26 damages sustained by any party found to have been wrongfully enjoined.” See Fed. R. 27 Civ. P. 65(c). Further, “every restraining order must: (A) state the reasons why it issued; 28 (B) state its terms specifically; and (C) describe in reasonable detail—and not by referring 1 to the complaint or other document—the act or acts restrained or required.” Fed. R. Civ. 2 P. 65(d)(1). 3 “In deciding a motion for a preliminary injunction, the district court ‘is not bound to 4 decide doubtful and difficult questions of law or disputed questions of fact.’” Int’l 5 Molders’ & Allied Workers’ Loc. Union No. 164 v. Nelson, 799 F.2d 547, 551 (9th Cir. 6 1986) (quoting Dymo Indus., Inc. v. Tapewriter, Inc., 326 F.2d 141, 143 (9th Cir. 1964)). 7 Whether to “grant . . . a preliminary injunction is a matter committed to the discretion of 8 the trial judge[,]” and that decision will be “reverse[d] only if that discretion is abused or 9 the decision is based on an erroneous legal standard or clearly erroneous findings of fact.” 10 See Sierra On-Line, 739 F.2d at 1421. 11 ANALYSIS 12 Through the instant Ex Parte Motion, Plaintiff seeks temporarily to enjoin BOA 13 from making any payments to URECO under the LOC. (See generally Ex Parte Mot.; 14 Mem.) The Court therefore analyzes Plaintiff’s request under the Winter factors. 15 I. Likelihood of Success on the Merits 16 Depending on its showing of irreparable harm, Plaintiff must demonstrate either a 17 probability of success on the merits or the existence of serious questions going to the 18 merits. Grocery Outlet Inc., 497 F.3d at 951 (quoting Sardi’s Rest., 755 F.2d at 723. 19 Plaintiff argues it is likely to succeed on the merits because URECO cannot demand 20 payment from BOA since there is undisputed evidence that Plaintiff properly canceled 21 orders under the terms of the April 12 Letter. (Ex Parte Mot. at 7–8.) 22 California Commercial Code § 5109(b) authorizes a court to enjoin the issuer of a 23 letter of credit from honoring a demand for payment from a beneficiary if honoring the 24 demand would facilitate fraud. Hendricks v. Bank of Am., N.A., 408 F.3d 1127, 1139 (9th 25 Cir. 2005) (internal citation omitted). In the absence of fraud, an issuer must honor a letter 26 of credit if the beneficiary has complied with its terms and conditions. See generally Mitsui 27 Mfrs. Bank v. Texas Com. Bank-Fort Worth, 159 Cal. App. 3d 1051, 1055 (1984). Whether 28 a beneficiary has complied with the presentation terms of a letter of credit implicates what 1 is known as the “independence principle.” San Diego Gas & Elec. Co. (“SDG&E”) v. 2 Bank Leumi, 42 Cal. App. 4th 928, 933–34 (1996). Under this principle, an issuer must 3 honor a demand for payment that complies with the presentation terms of a letter of credit 4 regardless of whether there is performance or non-performance of the underlying contract. 5 Id. 6 URECO argues the Court cannot enjoin BOA because of the independence principle, 7 and Plaintiff has not shown that the fraud exception applies to this case. (Opp’n at 8–15.) 8 Although Plaintiff failed to discuss either of these doctrines in its Ex Parte Motion and 9 only raised them for the first time in its Reply when responding to URECO’s opposition,1 10 (compare Mem., with Reply), the Court examines each of URECO’s arguments in turn. 11 A. Independence Principle 12 The independence principle is codified in California Commercial Code § 5103(d), 13 which states: 14 rights and obligations of an issuer to a beneficiary or a nominated person under a letter of credit are independent of the existence, performance, or 15 nonperformance of a contract or arrangement out of which the letter of credit 16 arises or which underlies it, including contracts or arrangements between the issuer and the applicant and between the applicant and the beneficiary. 17 18 The independence principle “is based on two policy considerations. First, the issuing bank 19 can assume no liability for the performance of the underlying contract because it has no 20 control over making the underlying contract or over selection of the beneficiary. Second, 21 the letter of credit would lose its commercial vitality if, before honoring drafts, the issuing 22 bank were obliged to look beyond the terms of the letter of credit to the underlying 23 contractual controversy between its customer and the beneficiary.” Id. (cleaned up). Thus, 24 the California Supreme Court had observed that the beneficiary of a letter of credit owes 25 no obligations to the issuer and “literal compliance with the letter of credit’s terms for 26

27 1 The Court “need not consider arguments raised for the first time in a reply brief.” Zamani v. 28 1 payment is all that is required.” W. Sec. Bank v. Super. Ct., 15 Cal. 4th 232, 249 (1997). 2 One of the implications of the independence principle is that unless a letter of credit 3 references the underlying contract and explicitly creates a condition for honoring a demand 4 for payment, a court cannot consider the underlying contract to interpret the presentation 5 terms of a letter of credit. Andy Marine, Inc. v. Zidell, Inc., 812 F.2d 534, 537 (9th Cir. 6 1987). 7 Under the independence principle, URECO contends the Court is unable to consider 8 Plaintiff’s allegation that URECO breached the underlying Distribution Agreement 9 because there is no explicit language in the LOC tying it to the Distribution Agreement. 10 (See generally Opp’n at 8–11.) Plaintiff, in turn, argues the Court may consider the merits 11 of its dispute with URECO under the Distribution Agreement because the LOC conditions 12 payment on the Parties’ performance under the Distribution Agreement. (See generally 13 Reply at 4–6.) In support of this argument, Plaintiff points to the second requirement of 14 the LOC’s section labeled “Undertaking Terms and Conditions” provided below: 15 WE HEREBY ISSUE THIS IRREVOCABLE LETTER OF CREDIT NO. 68139776 IN [URECO’S] FAVOR, FOR THE ACCOUNT OF 16 [PLAINTIFF], FOR UP TO AN AGGREGATE AMOUNT OF USD 17 35,000,000.00 AVAILABLE BY YOUR DRAFT(S) DRAWN ON US AT SIGHT, ACCOMPANIED BY THE FOLLOWING: 18 19 1. A COPY OF THE ORIGINAL LETTER OF CREDIT AND ALL AMENDMENTS THERETO, IF ANY. 20 2. A DATED STATEMENT SIGNED BY AN AUTHORIZED 21 OFFICER OF THE BENEFICIARY ON BENEFICIARY’S 22 LETTERHEAD READING AS FOLLOWS: 23 WE CERTIFY THAT THE AMOUNT DRAWN 24 REPRESENTS UNPAID ITEMS OF CONSOLIDATED ELECTRICAL DISTRIBUTORS, INC. AND/OR 25 INDEBTEDNESS OWING BY CONSOLIDATED 26 ELECTRICAL DISTRIBUTORS, INC., WHICH HAS BEEN PAID, BUT WHICH PA[Y]MENT, OR A 27 PORTION THEREOF, WAS PAID WITHIN NINETY 28 (90) DAYS OF A PETITION FILED BY OR AGAINST 1 CONSOLIDATED ELECTRICAL DISTRIBUTORS, INC. UNDER THE BANKRUPTCY CODE OR OTHER 2 INSOLVENCY STATUTE. COPY(IES) OF INVOICES 3 MARKED ‘UNPAID’ ARE ATTACHED. 4 3. COPY(IES) OF INVOICES MARKED “UNPAID[.”] THE 5 COPY(IES) OF UNPAID INVOICES DATED PRIOR TO THE STANDBY LETTER OF CREDIT ISSUING DATE ARE 6 ACCEPTABLE. 7 8 (Compl. Ex. 3 at 26 (emphasis added).) Under the independence principle, if URECO 9 complies with the three requirements articulated in the “Undertaking Terms and 10 Conditions” section of the LOC, BOA must honor its demand. SDG&E, 42 Cal. App. 4th 11 at 933–34. Nonetheless, Plaintiff argues that because the LOC requires a signed statement 12 from URECO certifying that the amount drawn represents Plaintiff’s “unpaid” items, the 13 LOC is tied to the underlying Distribution Agreement. (Reply at 5.) Accordingly, relying 14 solely on Steinmeyer v. Warner Consolidated Corporation, 42 Cal. App. 3d 515 (1974), 15 (see Reply at 4), Plaintiff requests the Court to determine whether there are unpaid items 16 under the terms of the Distribution Agreement. (Id. at 5.) 17 The Court declines to follow Steinmeyer. In Ground Air Transfer, Inc. v. Westates 18 Airlines, Inc., 899 F.2d 1269 (1st Cir. 1990), the First Circuit read Steinmeyer as creating 19 a special letter of credit rule. Id. at 1275. It observed that the California Supreme Court 20 would be unlikely to “follow Steinmeyer insofar as it significantly weakens the principle 21 of ‘independence’ of the letter of credit.” Id. The Court agrees and finds persuasive the 22 reasoning of Export-Import Bank of the United States v. United California Discount Corp., 23 738 F. Supp. 2d 1047, 1056 (C.D. Cal.), as amended (Dec. 7, 2010), aff’d, 484 F. App’x 24 91 (9th Cir. 2012). In Export-Import Bank, UPS Capital Business Credit (“UPS”) issued 25 two letters of credit to the Ministry of Education of the Kingdom of Jordan (the “MOE”) 26 to support the underlying contract that UPS’s debtor, Ashford International Inc. 27 (“Ashford”), had with the MOE. Id. at 1049–52. UPS conditioned the issuance of its two 28 letters of credit to MOE on Ashford obtaining two letters of credit of equal value for the 1 benefit of UPS, which Ashford got from United California Discount Corp. (“UCDC”). Id. 2 UPS subsequently assigned its rights to all the instruments incident to Ashford’s 3 indebtedness to the plaintiff, Export-Import Bank of the U.S. (“EIB”). Id. When Ashford 4 defaulted, UCDC refused to honor EIB’s demand for payment because UCDC claimed that 5 the letters of credit it had issued required EIB to show that Ashford had failed to perform 6 under its underlying contract with the MOE. Id. The UCDC letters of credit provided: 7 THE AMOUNT OF OUR DRAFT REPRESENTS FUNDS DUE U.S. AS A 8 RESULT OF DRAWING OF OUR LETTER OF CREDIT BY ORDER OF ASHFORD INTERNATIONAL, INC. UNDER THE TERMS OF THE 9 CONTRACT NO. (1/27/2000); LOAN NO. 3684–JO ISSUED BY 10 MINISTRY OF EDUCATION–THE HASHEMITE KINGDOM OF JORDAN. 11 12 Id. at 1056. The court concluded that this “general reference to the contract between 13 Ashford and the MOE [wa]s insufficient to create an explicit condition precedent for 14 payment under the UCDC LOCs.” Id. at 1057. Instead, in light of the plain language of 15 the UCDC letters of credit and their purpose as standby letters of credit, EIB was entitled 16 to draw upon the UCDC letters of credit when the MOE demanded payment on the letters 17 of credit issued by UPS. Id. In reaching this conclusion, the court relied on Andy Marine, 18 Inc. v. Zidell, Inc., 812 F.2d 534 (9th Cir. 1987), in which the Ninth Circuit observed that, 19 “[i]n the absence of clear evidence that the parties intended the letter to include 20 nondocumentary conditions, it defeats the whole purpose of the letter of credit to examine 21 the rights and wrongs of a contract dispute to determine whether the letter should be paid.” 22 Id. at 537. 23 Here, as in Export-Import Bank, the plain language of the LOC does not condition 24 payment under the LOC to performance under the underlying contract. Instead, the plain 25 language of the LOC provides that URECO is entitled to make a demand on the LOC when 26 there are “unpaid items.” (See Compl. Ex. 3 at 26.) As in Export-Import Bank, absent any 27 evidence that the Parties intended to condition payment on non-performance under the 28 Distribution Agreement, the Court need not delve into the merits of their underlying 1 contract dispute. Because none of the documents the Parties have submitted show that they 2 intended to condition payment on a failure to perform the underlying contract, the Court 3 finds that the LOC is independent of the Distribution Agreement. Accordingly, to succeed 4 on the merits, Plaintiff must show that URECO’s demand for payment on the LOC would 5 amount to material fraud. See Mitsui Mfrs. Bank, 159 Cal. App. 3d at 1057. 6 B. Fraud Exception 7 Under the fraud exception to the independence principle, Plaintiff must demonstrate 8 that URECO’s “demand for payment on the . . . LOC[ would be] . . . ‘forged or materially 9 fraudulent, or honor of the presentation would facilitate a material fraud by the beneficiary 10 on the issuer or applicant.’” Exp.-Imp. Bank, 738 F. Supp. 2d at 1059 (quoting Cal. Com. 11 Code § 5109(a)). “A material fraud occurs where the underlying contract deprives the 12 beneficiary of even a colorable right to drawn upon the letter of credit.” Id. (internal 13 quotation marks omitted) (quoting Ground Air Transfer, Inc., 899 F.2d at 1273); see also 14 Ground Air Transfer, Inc., 899 F.2d at 1273 (holding that a court may enjoin payment on 15 letter of credit only when “the contract deprives beneficiary of even a colorable right to do 16 so,” “circumstances reveal that the beneficiary’s demand for payment has absolutely no 17 basis in fact,” or “the beneficiary’s conduct has so vitiated the entire transaction that 18 legitimate purposes of the independence of the issuer’s obligation would no longer be 19 served” (internal quotation marks omitted)). 20 Plaintiff argues that any certification by URECO that the amount drawn on the letter 21 of credit represents unpaid items under the Distribution Agreement would constitute 22 material fraud because there are no outstanding invoices given Plaintiff’s cancellation of 23 the underlying orders pursuant to the cancellation provision in the April 12 Letter. (Reply 24 at 6–7; Compl. ¶¶ 19–20.) URECO, on the other hand, claims the cancellation provision 25 of the April 12 Letter ended on June 6, 2022, when President Biden announced the tariff 26 moratorium. (Opp’n at 24–25; Hsieh Decl. ¶ 5.) Both the Parties have provided the Court 27 with numerous emails and text messages supporting their respective versions of the story. 28 Because the record evidences a genuine dispute as to whether Plaintiff’s cancellation right 1 extended past June 6, 2022, the Court must conclude that URECO has a colorable claim. 2 Further, Plaintiff conceded at oral argument that the invoices URECO submitted are 3 genuine and relate to actual purchase orders from Plaintiff. Finally, Plaintiff’s reliance on 4 Mitsui Manufacturers Bank is unavailing because, unlike in this case, there was evidence 5 in Mitsui that the beneficiary had provided an untruthful certification statement. 159 Cal. 6 App. 3d at 1056. Because Plaintiff has failed to establish material fraud under the facts of 7 this case, Plaintiff cannot establish any probability of success on the merits under the fraud 8 exception to the independence principle. 9 II. Irreparable Harm 10 “The basis of injunctive relief in the federal courts is irreparable harm and 11 inadequacy of legal remedies.” Los Angeles Mem’l Coliseum Comm’n v. Nat’l Football 12 League, 634 F.2d 1197, 1202 (9th Cir. 1980) (internal citation omitted). “[P]laintiffs must 13 establish that irreparable harm is likely, not just possible, in order to obtain a preliminary 14 injunction.” All. for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1131 (9th Cir. 2011) 15 (internal citation omitted). An injury is irreparable if a court cannot remedy the harm 16 through monetary remedies. Sampson v. Murray, 415 U.S. 61, 90 (1974) (“The possibility 17 that adequate compensatory or other corrective relief will be available at a later date, in the 18 ordinary course of litigation, weighs heavily against a claim of irreparable harm” (internal 19 citation omitted)). 20 Plaintiff argues that monetary damages will be inadequate here for several reasons. 21 First, there is no automatic recognition of foreign judgments in Taiwan. (Mem. at 9–10). 22 Instead, “under Article 4-1 of the Taiwanese Compulsory Enforcement Act, a foreign 23 judgment must receive an ‘approving judgment’ from a court in Taiwan to be enforceable.” 24 (Id. at 10.) “Consequently, if [Plaintiff] obtains a judgment in this action, it may be unable 25 to execute on the judgment in Taiwan.” (Id.) Even though Taiwan does not 26 “automatically” recognize foreign judgments, however, it appears that it has a process for 27 recognizing them. (See id. at 9–10.) Generally, the difficulty of bringing an action in a 28 foreign jurisdiction, without more, does not constitute irreparable harm. See e.g., KMW 1 Intern. v. Chase Manhattan Bank, N.A., 606 F.2d 10, 16 (2d Cir. 1979) (concluding that 2 “‘unsettled situation in Iran’ [wa]s simply insufficient to release any party from obligations 3 under the letter of credit” and finding no irreparable harm where monetary damages would 4 be adequate.); Enter. Int’l, Inc. v. Corporacion Estatal Petrolera Ecuatoriana, 762 F.2d 5 464, 473 (5th Cir. 1985) (observing that courts generally refuse to grant injunctive relief 6 when it has been shown that foreign courts provide a legal remedy or, at worst, that access 7 to foreign courts is speculative (collecting cases)). “[W]hile the need to resort to the legal 8 processes of [a foreign jurisdiction] might well complicate [] enforcement efforts, … these 9 complexities do not rise to the extraordinary level sufficient to warrant a finding of 10 irreparable harm.” Fluor Daniel Argentina, Inc. v. ANZ Bank, 13 F. Supp. 2d 562, 565 11 (S.D.N.Y. 1998). Plaintiff’s speculation that it “may be” unable to execute judgment in 12 Taiwan falls short of establishing that irreparable injury absent preliminary injunctive relief 13 is likely, as opposed to merely possible. See All. for the Wild Rockies, 632 F.3d at 1131. 14 Second, in Rockwell International Systems, Inc. v. Citibank, N.A., 719 F.2d 583 (2d 15 Cir. 1983), the district court granted a preliminary injunction when it was “highly probable 16 that the Hague Tribunal [would] refuse to accept jurisdiction over plaintiff’s claims.” 17 (Reply at 8.) This case implicates a similar issue because Taiwan is not a signatory to 18 Hague Convention on service of process or any other international agreement that governs 19 service of process. (Id.) Even if Taiwan is not a signatory to the Hague Convention on 20 service of process, however, there are other recognized methods for effectuating service in 21 non-signatory countries. See, e.g., Yvonne A. Tamayo, Catch Me If You Can: Serving 22 United States Process on an Elusive Defendant Abroad, 17 Harv. J.L. & Tech. 211, 243 23 (2003). 24 Third and finally, Plaintiff contends that even though URECO’s Taiwanese status 25 was foreseeable, Plaintiff sought to avoid the risk of litigating in Taiwan by incorporating 26 a forum selection clause in the Distribution Agreement, which provides California courts 27 personal jurisdiction over URECO for any dispute between the Parties arising under the 28 Distribution Agreement. (Mem. at 9.) The Distribution Agreement, however, is distinct 1 from the LOC. See supra Section I.A. In any event, Plaintiff assumed the risk of enforcing 2 a money judgment in Taiwan because such transnational enforcement actions are a 3 foreseeable consequence of relying on letters of credit when structuring transactions with 4 an international company. See Fluor Daniel Argentina, Inc. v. ANZ Bank, 13 F. Supp. 2d 5 562, 565 (S.D.N.Y. 1998). 6 Ultimately, the Court concludes that Plaintiff’s arguments are unavailing and that 7 Plaintiff has failed to establish that monetary damages would not suffice to remedy any 8 harm Plaintiff might suffer. 9 III. Totality of the Circumstances 10 Because Plaintiff has failed to establish either serious questions going to the merits 11 or a likelihood of irreparable harm, the Court finds that neither a temporary restraining 12 order nor a preliminary injunction is warranted under either of the two Winter standards 13 articulated by the Ninth Circuit. Although analysis of the remaining Winters is unnecessary 14 in light of these conclusions, the Court further notes it would be inequitable to preclude 15 URECO from obtaining the benefits of the LOC that it expressly bargained for with 16 Plaintiff. See SDG&E, 42 Cal. App. 4th 928 at 934 (“One of the expected advantages and 17 essential purposes of a letter of credit is that the beneficiary will be able to rely on assured, 18 prompt payment from a solvent party; necessarily, a part of this expectation of ready 19 payment is that there will be a minimum of litigation and judicial interference, and this is 20 one of the reasons for the value of the letter of credit device in financial transactions.” 21 (cleaned up)). 22 / / / 23 / / / 24 / / / 25 / / / 26 / / / 27 / / / 28 / / / l CONCLUSION 2 For reasons set forth above, the Court DENIES Plaintiff's Ex Parte Motion for 3 ||(1) Order to Show Cause Why a Preliminary Injunction Should Not Issue and 4 ||(2) Temporary Restraining Order (ECF No. 3). 5 IT IS SO ORDERED. 6 Dated: February 13, 2024 —_—— (2 [59 \G re g Honorable Todd W. Robinson 9 United States District Judge 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28