## Facts

- Sheerbonnet, Ltd. (Sheerbonnet), a British trading company, sold troop carriers to Hady Establishment (Hady), a Saudi Arabian company, for use during the Persian Gulf War.
- Hady obtained an irrevocable $14,080,000 letter of credit from a Swiss bank; Hady paid 10% down, and the remaining balance (about $12.4 million) became due after Sheerbonnet performed.
- After completing performance, Sheerbonnet instructed that the balance be paid in U.S. dollars by wire transfer to Sheerbonnet’s account at Bank of Credit and Commerce, S.A. (BCCI) in London.
- On July 3, 1991, the Swiss bank instructed its New York correspondent (Northern Trust International) to wire approximately $12.4 million to American Express Bank, Ltd. (AEB) in New York, for credit to BCCI’s account at AEB, with a July 5 value date, for Sheerbonnet’s benefit.
- On the morning of July 5, 1991, regulators suspended BCCI’s operations abroad, and New York authorities seized and closed BCCI’s New York operations; AEB was advised of the suspension/seizure before it received the incoming transfer.
- Despite that notice, AEB credited the incoming funds to BCCI’s account at AEB and then claimed the funds as a setoff against debts BCCI owed AEB.
- Sheerbonnet did not receive the $12.4 million payment and sued AEB asserting conversion, tortious interference with contract, and unjust enrichment, based on AEB’s alleged knowing diversion of funds intended to pay Sheerbonnet.
- AEB moved to dismiss, arguing (among other things) that U.C.C. Article 4A supplied the exclusive remedy for the dispute and that AEB merely followed the payment instructions; after an earlier abstention ruling was reversed by the Second Circuit, AEB renewed its motion to dismiss and also relied on the BCCI liquidation turnover order and discharge language.

## Issues

1. Whether New York U.C.C. Article 4A provides an exclusive remedial scheme that displaces Sheerbonnet’s common-law and equitable claims arising out of the wire transfer.
2. Whether the BCCI liquidation turnover order and related discharge language barred Sheerbonnet’s action for damages against AEB, or required joinder of the New York Superintendent of Banks under Rule 19.
3. Whether, accepting the complaint’s allegations as true, Sheerbonnet stated claims for conversion, tortious interference with contract, and unjust enrichment under New York law.

## Decision

- The court denied AEB’s renewed motion to dismiss.
- Article 4A did not automatically bar all common-law claims; it displaced only those claims that would impose duties or liabilities inconsistent with Article 4A’s allocation of rights and obligations in funds transfers. At the pleading stage, Sheerbonnet’s tort and restitution theories were not foreclosed on that ground.
- The liquidation turnover order did not defeat Sheerbonnet’s suit because Sheerbonnet sought damages for AEB’s own alleged misconduct in crediting and setting off the transfer after notice of the BCCI seizure, not recovery of specific BCCI estate property.
- The Superintendent was not a required party for purposes of Rule 19 because the case could proceed between Sheerbonnet and AEB without determining the Superintendent’s rights to liquidation assets or otherwise preventing complete relief between the parties.
- Taking the alleged facts as true on a Rule 12(b)(6) motion, the complaint sufficiently pleaded conversion (dominion over an identifiable fund), tortious interference (intentional interference with Sheerbonnet’s contractual right to payment), and unjust enrichment (AEB’s alleged retention of a benefit at Sheerbonnet’s expense).

## Legal Principles

- U.C.C. Article 4A is a detailed statutory scheme for funds transfers, but it does not eliminate every non-statutory claim in this area; common-law and equitable claims are displaced only when they conflict with Article 4A’s specific rules on duties, rights, and risk allocation.
- A discharge provision in a liquidation-court turnover order protects conduct taken to comply with the order, but it does not necessarily bar a separate damages action alleging a bank’s independent tortious conduct in handling a transfer before or apart from the turnover.
- Under Rule 12(b)(6), the court assumes well-pleaded factual allegations are true and draws reasonable inferences in the plaintiff’s favor.
- Under New York law, conversion may be pleaded based on a specific, identifiable fund over which the defendant is alleged to have exercised unauthorized dominion.
- Tortious interference with contract requires a valid contract, the defendant’s knowledge of it, intentional interference causing breach or nonperformance, and resulting damages.
- Unjust enrichment may be pleaded where the defendant is alleged to have obtained a benefit at the plaintiff’s expense under circumstances that make retention of the benefit inequitable.

## Conclusion

The court allowed Sheerbonnet’s conversion, tortious interference, and unjust enrichment claims to go forward, holding that Article 4A did not categorically displace non-statutory remedies on these allegations and that the BCCI liquidation turnover order did not bar a damages action against AEB for its alleged setoff of the wire-transfer proceeds after notice of BCCI’s collapse.


Sheerbonnet, Ltd. v. American Express Bank, Ltd., 951 F. Supp. 403 (1995)