## Facts

- PVF USA, L.L.C. ordered steel pipe from LaBarge Pipe & Steel Co. for $143,613.40 after LaBarge refused open-account credit terms.
- PVF arranged for First Bank to issue an irrevocable standby letter of credit (LC) for LaBarge’s benefit in the amount of $144,000.
- A First Bank employee, Allen David, faxed LaBarge a copy of the original LC and later faxed a revised version after LaBarge requested changes; both fax cover sheets stated the bank was sending “the letter of credit” or “the revision.”
- The LC required payment upon presentation of a sight draft, a certification of PVF’s default, and the draft being “accompanied by this Irrevocable Letter of Credit,” and it incorporated UCP 400.
- PVF failed to pay and filed bankruptcy.
- LaBarge attempted to draw on the LC by presenting a sight draft, the required certification, and only a faxed copy of the LC, explaining the original was missing.
- First Bank received the presentment on February 17, 2003 and dishonored the draw for discrepancies, providing written notice the same day and telephone notice on February 20.
- LaBarge sued First Bank and David for wrongful dishonor and related LC theories, and also asserted Louisiana-law claims including detrimental reliance and negligent misrepresentation (the latter asserted against David).

## Issues

1. Whether the LC and UCP 400 required presentation of the original LC, making a faxed copy noncompliant and justifying dishonor.
2. Whether First Bank’s notice of dishonor satisfied UCP 400 timing and content requirements.
3. Whether Louisiana-law claims for detrimental reliance and negligent misrepresentation could proceed based on the bank employee’s communications and LaBarge’s claimed reliance.

## Decision

- The court affirmed summary judgment for First Bank on LaBarge’s LC-based claims, holding the bank properly dishonored the draw for failure to present the original LC as required by strict documentary compliance under UCP 400.
- The court affirmed rejection of LC-based theories that attempted to bypass the LC’s express documentary conditions through generalized good-faith arguments.
- The court held the bank’s notice of dishonor complied with UCP 400 on the record presented.
- The court reversed in part and remanded, holding there was a genuine dispute of material fact on at least one negligent misrepresentation/detrimental reliance theory tied to David’s statements and the bank’s conduct regarding the faxed LC.

## Legal Principles

- Under UCP 400, an issuing bank deals in documents, not the underlying transaction, and the beneficiary must strictly comply with the credit’s documentary conditions.
- Language requiring drafts to be “accompanied by this Irrevocable Letter of Credit” is construed to require presentation of the original LC absent express authorization to use copies.
- UCP 400 requires timely notice of dishonor and disclosure of discrepancies; compliance may be evaluated based on the bank’s actions within the prescribed banking-day framework.
- Under Louisiana law, negligent misrepresentation and detrimental reliance may be shown by a duty to provide correct information, a misleading or incorrect representation, and reasonable detrimental reliance; reasonableness of reliance and whether statements are misleading are commonly fact questions not suited to summary judgment when evidence conflicts.
- Proper dishonor under a letter of credit does not automatically eliminate potential tort exposure arising from separate misrepresentations about what documentation will be accepted.

## Conclusion

The Fifth Circuit held that UCP 400 strict compliance required LaBarge to present the original letter of credit, so First Bank’s dishonor and notice were legally proper, but it remanded for trial-level proceedings on a fact-dependent misrepresentation/detrimental reliance claim based on the bank employee’s communications that allegedly led LaBarge to believe a faxed copy would suffice.


LaBarge Pipe & Steel Co. v. First Bank, 550 F.3d 442 (5th Cir. 2008)