James G. McConnell

LaSalle Bank issued a letter of credit to its customer, securing payment for the delivery of plastic film manufacturing machinery to a factory in China. In order to finance purchase of parts for the machines from American vendors, from time to time the customer assigned portions of  the proceeds from this letter of credit to its vendors.

As proceeds from the letter of credit were received, LaSalle should have paid the receipts to asignees of the proceeds in order of the seniority of the assignments. Instead, LaSalle asked its customer which vendors should be paid first, and the customer favored vendors whose parts were yet to be delivered over vendors holding older assignments, whose parts had already been shipped to China.

When the customer filed bankruptcy and could not pay all the vendors, Mr. McConnell filed suit against the bank for violating the prioroty of the assignments, and won a summary judgment in favor of his clients against the bank for $335,000.00

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Lessons Learned:

The customer is not always right.