DCW Updates
DCW Monthly: December 2024
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DCW Feature
Bayport Polymers LLC v. CB&I, LLC [2024]
Beneficiary Bayport Polymers appealed temporary injunction restraining presentation of LC documents.
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Bayport Polymers LLC v. CB&I, LLC
No. 14-23-00643-CV, slip op. (Tex. App. July 23, 2024) [USA]
Type of Lawsuit: Beneficiary appealed temporary injunction restraining presentation of LC documents.
Topics: Breach of Contract; Injunction; Material Fraud; UCC Rev. Section 5-102; UCC Section 5-103; UCC Section 5-108; UCC Section 5-109(b); Prior UCC Section 5-114.
Parties:
• Appellant/Defendant/Beneficiary – Bayport Polymers, LLC (d/b/a Baystar)
• Appellee/Plaintiff/Contractor/Applicant – CB&I LLC
• Issuer – unspecified
Underlying Transaction: One of two large engineering and construction projects of a polyethylene plant.
LC: Approximately USD 75 million standby LC; silent at choice of law and practice rules; Texas Rev. Article 5 applied.
Decision: The Court of Appeals of Texas, 14th District, Jewell, Poissant and Bourliot, JJ., reversed and remanded.
Rationale: (1) Appellate review of trial order will not unduly place form over substance were reasons for decision are in writing and unambiguous; (2) under Texas law, “lack of colorable right” is not sole basis to restrain LC beneficiary from presenting documents; and (3) temporary LC injunction vacated where trial court misapplied established facts of case and Tex. UCC Rev. Section 5-109(b); applicant failed to show that alleged fraud was so egregious to vitiate entire transaction.
No. 14-23-00643-CV, slip op. (Tex. App. July 23, 2024) [USA]
Type of Lawsuit: Beneficiary appealed temporary injunction restraining presentation of LC documents.
Topics: Breach of Contract; Injunction; Material Fraud; UCC Rev. Section 5-102; UCC Section 5-103; UCC Section 5-108; UCC Section 5-109(b); Prior UCC Section 5-114.
Parties:
• Appellant/Defendant/Beneficiary – Bayport Polymers, LLC (d/b/a Baystar)
• Appellee/Plaintiff/Contractor/Applicant – CB&I LLC
• Issuer – unspecified
Underlying Transaction: One of two large engineering and construction projects of a polyethylene plant.
LC: Approximately USD 75 million standby LC; silent at choice of law and practice rules; Texas Rev. Article 5 applied.
Decision: The Court of Appeals of Texas, 14th District, Jewell, Poissant and Bourliot, JJ., reversed and remanded.
Rationale: (1) Appellate review of trial order will not unduly place form over substance were reasons for decision are in writing and unambiguous; (2) under Texas law, “lack of colorable right” is not sole basis to restrain LC beneficiary from presenting documents; and (3) temporary LC injunction vacated where trial court misapplied established facts of case and Tex. UCC Rev. Section 5-109(b); applicant failed to show that alleged fraud was so egregious to vitiate entire transaction.
Factual Summary:
To support its engineering and construction work on a high-density polyethylene plant in Bayport, Texas, CB&I, LLC (Contractor/Applicant) applied for and caused an unspecified issuing bank to issue a standby letter of credit in favor of Bayport Polymers, LLC (Beneficiary). A key metric in Contractor/Applicant’s progress was “RFHI Completion” whereby Beneficiary would be able to introduce hydrocarbons into the plant. This completion date was originally expected for about one-thousand days after the effective contract date of October 8, 2021. Each week past planned completion would result in liquidated damages owed by Contractor/Applicant (capped at 6% of contract value). Beneficiary could pursue such damages in three ways: (1) invoice Contractor/Applicant for damages with a 30-day due date; (2) withhold amounts already due and payable to Contractor/Applicant; or (3) “collect on either letter of credit”.
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Cases Referenced:
• SRS Products. Co. v. LG Engineering Co., 994 S.W.2d 380 (Tex. App. 1999)
• Philipp Bros., Inc. v. Oil Country Specialists, Ltd., 787 S.W.2d 38 (Tex. 1990)
• SRS Products. Co. v. LG Engineering Co., 994 S.W.2d 380 (Tex. App. 1999)
• Philipp Bros., Inc. v. Oil Country Specialists, Ltd., 787 S.W.2d 38 (Tex. 1990)