Full opinion text
OPINION PADOVA, District Judge. Table of Contents I. Factual Background........................................................826 II. Standard of Review.........................................................828 III. Discussion.................................................................828 A. Choice of Law.........................................................828 B. Letters of Credit.......................................................829 1. Generally..........................................................829 2. The Independence Principle..........................................829 C. Article 5..............................................................830 1. Scope of Article 5...................................................830 2. Definitions.........................................................830 (a). Bank Classifications.............................................831 (b). Obligations Imposed.............................................833 (c). Central Asia’s Classification ......................................833 3. Does Article 5 Apply? ...............................................835 (a). Central Asia’s Position...........................................835 (b). Feinberg’’s Position..............................................835 (e). Applicability Conclusion..........................................836 D. Feinberg’s Case........................................................838 E. Common Law Claims...................................................841 1. Fraud.............................................................841 2. Conversion.........................................................844 3. Civil Conspiracy....................................................846 4. Tortious Inducement (Interference With Contractual Relations)...........846 5. Negligent Misrepresentation.........................................846 F. RICO.................................................................847 1. RICO Analysis .....................................................849 (a). Predicate Acts..................................................849 (b). Continuity......................................................849 (c). “Enterprise”....................................................850 (d). Injury.........................................................850 (e). Fraud .........................................................850 (f). Conspiracy.....................................................850 IV. Conclusion ................................................................851 Plaintiff, Leonard A. Feinberg, Inc. (“Feinberg”), a Pennsylvania corporation, brings suit against two Hong Kong corporations, Central Asia Capital Corporation, Limited (“Central Asia”) and Fashion Will, Limited (“Fashion Will”). Before the Court is Central Asia’s Motion for Summary Judgment filed pursuant to Fed.R.Civ.P. 56(c). For the following reasons, the Court will grant in part and deny in part Central Asia’s Motion. The Court remarks preliminarily that it faces an issue of first impression: specifically, whether the customer of a letter of credit may maintain statutory. and common law causes of action against a bank authorized by the issuing bank under a red clause to advance funds to the beneficiary of that letter of credit. I. Factual Background Feinberg imports and sells clothing in the United States, and Fashion Will supplies Feinberg with both raw materials and finished garments. In March, 1995, Feinberg contracted with Fashion Will to purchase 30,000 dozen cotton rompers. Fashion Will requested that Feinberg obtain a letter of credit naming Fashion Will as the beneficiary. On March 28, 1995, Feinberg caused Meridian Bank (“Meridian”), located in Philadelphia, Pennsylvania,- to issue a letter of credit (“Letter 1”) in the amount of $1,000,-000, naming Fashion Will as the beneficiary. (See PL’s Mem. Opp. Def.’s Mot. Summ. J. Ex. 9 (“Pl.’s Mem.”)). Under the terms and conditions of Letter 1, after Fashion Will presented specific documents to Meridian indicating that Fashion Will was making a shipment of merchandise to Feinberg, Meridian would provide Fashion Will with the purchase price for the merchandise. Under Letter 1, Feinberg remained ultimately liable to Meridian. On March 30, 1995, Fashion Will asked Feinberg to modify Letter 1 by adding a “red clause.” Fashion Will told Feinberg that Fashion Will could not complete Feinberg’s order without the red clause. The red clause provided: UNDER “OTHER TERMS / INSTRUCTIONS,” PLEASE INCLUDE ‘RED CLAUSE’ TERMS: NEGOTIATIONS UNDER THIS LETTER OF CREDIT ARE RESTRICTED TO CENTRAL ASIA CAPITAL-CORP. LTD., HONG KONG. RED CLAUSE FACILITY: CENTRAL ASIA CAPITAL CORP. LTD. HONG KONG AUTHORIZED TO MAKE SIXTY PERCENT ADVANCES UNDER THIS LETTER OF CREDIT (SUCH ADVANCES REDUCE AVAILABLE BALANCE HEREUNDER) TO FASHION WILL LTD. ONLY (NOT TRANSFEREES) AVAILABLE BY FASHION WILL LET. SIGHT DRAFT ON CENTRAL ASIA CAPITAL CORP. LTD. HONG KONG FOR THE AMOUNT OF THE ADVANCE AND FASHION WILL LTD. WRITTEN UNDERTAKING ADDRESSED TO LEONARD A. FEINBERG, INC. STATING WE HEREBY ACKNOWLEDGE RECEIPT OF USD600000.00 REPRESENTING AN ADVANCE PAYMENT UNDER LETTER OF CREDIT NO. 00499573 ISSUED BY MERIDIAN BANK. WE HEREBY CERTIFY THAT THESE FUNDS WILL BE USED TO PURCHASE RAW MATERIAL OF FINISHED PRODUCTS TO ENABLE U.S. TO EFFECT SHIPMENTS OF LADIES WEARING APPAREL AND FURTHER UNDERTAKE TO DELIVER CONFORMING SHIPPING DOCUMENTS. AS PER THE LETTER OF CREDIT, TO AUTHORIZE CENTRAL ASIA CAPITAL CORP. LTD. HONG KONG OR BEFORE JULY 30, 1995 AND PROCEEDS SIXTY PERCENT OF EACH DRAWING PLUS INTEREST TO RETIRE THE PRINCIPAL AND INTEREST AMOUNTS DUE AND OWING TO THEM.’ REIMBURSEMENT INSTRUCTION: UPON RECEIPT OF CONFORMING DOCUMENTS WE MAKE ADVANCE PAYMENT AS INDICATED IN THE RED CLAUSE FACILITY ABOVE AND DEDUCT FROM THE PROCEEDS OF PAYMENTS MADE BY U.S. AND ALL AMOUNTS DUE TO YOU. IN THE EVENT SUCH DOCUMENTS ARE NOT PRESENTED TO YOU ON OR PRIOR TO JULY 30TH 1995 THEN YOU MUST SEND U.S. TESTED TELEX NOT LATER THAN THE SPECIFIED L/C EXPIRY DATE INDICATING THE SAME AND THE AMOUNT OF OUTSTANDING ADVANCES PLUS INTEREST DUE AND WE WILL REIMBURSE YOU IN ACCORDANCE WITH YOUR INSTRUCTIONS. All other terms and conditions of the original credit instrument remain unchanged. (Def.’s Mem. Supp. Mot. Summ. J. Ex. 1) (“Def.’s Mem.”). On April 4,1995, the red clause was added to Letter 1, allowing Central Asia to advance Fashion Will money needed to purchase raw materials to fill Feinberg’s order without actually requiring Fashion Will to first present the specified documents to Meridian. (See Pl.’s Mem. Ex. 13). In the future, after Fashion Will shipped the merchandise to Feinberg, Central Asia was to present the specified shipping documents to Meridian— sight drafts and an undertaking by Fashion Will certifying that the advance was being used to purchase raw materials of finished products — in conjunction with Central Asia’s request for reimbursement. Between April 6,1995 and September 5,1995, in accordance with Fashion Will’s requests, Feinberg induced Meridian to modify Letter 1 to extend certain dates and increase the amount of credit. (See Pl.’s Mem. Exs. 17-18; Exs. 20-24; Ex. 28). On April 10,1995, Central Asia sent a telex to Meridian stating that it had advanced Fashion Will $600,000 pursuant to Letter l’s red clause. Central Asia attached the undertaking from Fashion Will. Central Asia repeatedly advised Meridian of its advances to Fashion Will via telex on July 21, 1995, July 25,1995, September 11,1995, and September 14, 1995. After Central Asia sent each telex to Meridian, it mailed letters confirming the telexes and enclosing the undertakings by Fashion Will to Meridian’s office in Philadelphia. On September 1, 1995, Fashion Will told Feinberg that a typhoon in China had flooded its factory and damaged the merchandise, necessitating a new letter of credit. Feinberg then caused Meridian to issue a second letter of credit (“Letter 2”) for $310,-199.18, which also contained a red clause. (See Pl.’s Mem. Ex. 39). On September 27, 1995, Fashion Will informed Feinberg that financial difficulties prevented it from filling Feinberg’s orders. At this meeting, Fashion Will also admitted that it used the red clause advances to reduce its indebtedness to Central Asia. According to Fashion Will, the collateral securing its loans from Central Asia had decreased in value, and Central Asia pressured it to use the red clause advances to pay off the loan, instead of purchasing raw materials for Feinberg’s order. On December 1,' 1995, Central Asia made calls upon Meridian on Letter I and Letter 2. II. Standard of Review Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment “shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). An. issue is “genuine” only if there is sufficient evidence for a reasonable jury to find for the non-moving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). Furthermore, bearing in mind that all uncertainties are to be resolved in favor of the nonmoving party, a factual dispute is only “material” if it might affect the outcome of the case. Id. Rule 56(e) directs summary judgment “after adequate time for discovery ... against a party who fails to make a showing sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). III. Discussion A. Choice of Law “A federal court exercising diversity jurisdiction must apply the choice of law rules of the forum state.... Pennsylvania Courts generally honor the intent of the contracting parties and enforce choice of law provisions in contracts executed by them.” Kruzits v. Okuma Mach. Tool, Inc., 40 F.3d 52, 55 (3d Cir.1994) (citing, inter alia, Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 497, 61 S.Ct. 1020, 1022, 85 L.Ed. 1477 (1941)). In the instant case, the letters of credit contained the following provision: [tjhis agreement, each Credit and all transactions in connection with each Credit shall be interpreted, construed and enforced according to: (i) the ‘Uniform Customs and Practice for Documentary Credits’ ... (ii) the laws of the Commonwealth of Pennsylvania, including without limitation the Pennsylvania Uniform Commercial Code; and (iii) the Acts of the Congress of the United States of America. (Def.’s Mem. Ex. 5 at 9). The red clauses did not alter this provision in the letter of credit. (See Def.’s Mem. Ex. 2 at 2 (stating that “[a]ll other terms and conditions of the original credit instrument remain unchanged”)). The Court honors this forum selection provision and applies the statutory and common law of the forum state, Pennsylvania. Article 5 of Pennsylvania’s Uniform Commercial Code (“UCC”) covers letters of credit. See Uniform Commercial Code — Letters of Credit, 13 Pa. Cons.Stat. Ann. §§ 5101-5117 (West 1984 & Supp. 1996) (“Article 5”). The forum selection provision also refers to the-Uniform Customs and Practice for Documentary Credits (International Chamber of Commerce Pub. No. 500 (1993 Revision)) (“UCP”). “The UCP was drafted by the International Chamber of Commerce for the purposes of establishing uniformity in the treatment of documentary credits and facilitating international trade practices.” Tudor Dev. Group, Inc. v. United States Fidelity & Guar. Co., No. 88-758, 1991 WL 353443, at *8 (M.D.Pa. Jan. 7,1991) (citing In re Glade Springs, Inc., 47 B.R. 780, 783 (Bankr.E.D.Tenn.1985), aff'd, 826 F.2d 440 (6th Cir.1987)), aff'd, 968 F.2d 357 (3d Cir.1992). The UCP, however, neither displaces the UCC nor -provides the applicable substantive law. “Pennsylvania regards the UCP as a recording of common practice, and not the substantive law of a state which contracting parties may choose under the choice of law provision of the [UCC].” Banco Nacional de Desarrollo v. Mellon Bank, N.A., 726 F.2d 87, 90 n. 4 (3d Cir.1984) (citations omitted). See also Sound of Market St., Inc. v. Continental Bank Int’l, 819 F.2d 384, 388 (3d Cir.1987) (“assuming that Pennsylvania’s choice of law rules dictate the application of Pennsylvania law, a Pennsylvania court would apply Pennsylvania’s version of the UCC as the governing law even if a letter of credit has been made ‘subject’ to the UCP”); Intraworld Indus., Inc. v. Girard Trust Bank, 461 Pa. 343, 336 A.2d 316, 322-23 (1975) (noting “the UCP is by definition a recording of practice rather than a statement of legal rules”). While the UCP does not dictate substantive law, the extent to which it may be relied upon for illustration or supplementation remains an open question. See Sound, 819 F.2d at 388 n. 2 (stating “[although we see no reason that the UCP may not be incorporated by reference as a term of the letter of credit ... or be considered as evidence of general banking usage, we need not decide the role of the UCP under Pennsylvania law in the context of this case”). B. Letters of Credit 1. Generally A letter of credit is basically “a promise by the ‘issuer’ (commonly a bank) to the ‘beneficiary’ (usually a seller of goods) to extend credit on behalf of the beneficiary’s customer (usually a buyer of goods).” Wood v. R.R. Donnelley & Sons Co., 888 F.2d 313, 317 (3d Cir.1989) (citation omitted). See Tudor Dev. Group, Inc. v. United States Fidelity & Guar. Co., 968 F.2d 357, 360 (3d Cir.1992) (defining letter of credit as “an engagement by an issuer, usually a bank, made at the request of a customer for a fee, to honor a beneficiary’s drafts or other demands for payment upon satisfaction of the conditions set forth in the letter of credit”) (citing Article 5 § 5103(a)); Leney v. Plum Grove Bank, 670 F.2d 878, 881 (10th Cir.1982) (describing letter of credit as “closely akin to a cashier’s cheek or other negotiable instrument issued by a bank”). Letters of credit have long facilitated the flow of international commerce by providing assurance to the “seller of good[s] (i.e., the ‘beneficiary’... ) of prompt payment upon presentation of the documents. A seller who would otherwise have only the solvency and good faith of his buyer as assurance of payment may, with a letter of credit, rely on the full responsibility of the bank.” Intraworld, 336 A.2d at 323. “The essential function of this device is to assure a party to an agreement that he will receive the benefits of his performance.” Wood, 888 F.2d at 317 (citation omitted). When the seller is unfamiliar with the creditworthiness of the buyer, the bank issues a letter of credit and “substitutes its credit for that of the customer,” thereby assuring the seller of receiving payment. Leney, 670 F.2d at 881. See Banco Nacional, 726 F.2d at 91 (referring to letter of credit as an “efficacious arrangement which assures payment for completion of an obligation by placing the duty to pay on an issuer of good financial reputation”). The typical letter of credit transaction involves three distinct relationships: the underlying contract between the customer and the beneficiary which gave rise to their resort to the letter of credit mechanism to arrange payment; the contract between the bank and its customer regarding the issuance of the letter and reimbursement of the bank upon its honoring a demánd for payment; and the letter of credit itself, obligating the bank to pay the beneficiary. Sound, 819 F.2d at 388 (citations omitted). In the instant ease, the underlying contract between Feinberg and Fashion Will involved Feinberg’s purchase of the cotton rompers from Fashion Will. Feinberg established a second contract — between the issuing bank, Meridian, and its customer, Feinberg — when he caused Meridian to issue letters of credit naming Fashion Will as the beneficiary. Meridian’s obligation to pay Fashion Will under the letter of credit constitutes the third relationship. 2. The Independence Principle The most salient feature of a letter of credit is “its independence from both the customer-issuer transaction and the underlying contract between the customer and the beneficiary.” Wood, 888 F.2d at 318 (citation omitted). The “independence principle” dictates that the letter of credit is a “commercial instrument completely separate from the underlying contract between the customer and beneficiary. The independence principle obliges the issuer to honor the draft when the beneficiary presents conforming documents without reference to compliance with the terms of the underlying contract between the customer and the beneficiary.” Tudor, 968 F.2d at 360 (citation omitted). See Wood, 888 F.2d at 318 (remarking that “Pennsylvania considers this independence necessary to preserve the basic policy of letter of credit law, namely to ensure prompt payment to sellers”) (citation omitted); Intraworld, 336 A.2d at 323 (stating “[l]ongstanding case law has established that, unless otherwise agreed, the issuer deals only in documents”). “Independence” essentially dictates that “[t]he issuer must honor conforming documents regardless of the terms that may, or may not, govern the underlying contract. A beneficiary who produces proper documents may draw on the letter even if he has not done the performance described by them.” Wood, 888 F.2d at 318 (citations omitted). See also Intraworld, 336 A.2d at 323 (noting “[a]bsent an agreement to the contrary, the issuer is, under the general rule, not required or even permitted to go behind the documents to determine if the beneficiary has performed in conformity with the underlying contract”). In the event that a disagreement arises between the customer and the beneficiary, “the dispute is resolved with the money already in the pocket of the beneficiary .... [Furthermore,] when an issuer makes payment under a letter of credit, the issuer is satisfying its own primary obligation to the beneficiary, without reference to the rights of its customer under the underlying contract with the beneficiary.” Tudor, 968 F.2d at 360. Extension of the independence principle beyond issuing banks to advising banks, confirming banks, and other banks involved as facilitators of letter of credit transactions is an emerging, unsettled area of the law. C. Article 5 1. Scope of Article 5 Article 5’s coverage encompasses, inter alia, “a credit issued by a bank if the credit requires a documentary draft or a documentary demand for payment” and a credit that “conspicuously states that it is a letter of credit or is conspicuously so entitled.” Article 5 § 5102(a)(1), (3). If the engagement does not fall within these parameters, Article 5 does not apply. Id. at § 5102(b). Article 5 defines the reach of the rules and concepts applicable to letters of credit: (c) Rules and Concepts of Letters of Credit. — This division deals with some but not all of the rules and concepts of letters of credit as such rules or concepts have developed prior to this title or may hereinafter develop. The fact that this division states a rule does not by itself require, imply or negate application of the same or a converse rule to a situation not provided for or to a person not specified by this division. Id. at § 5102(c). An accompanying comment explains: 2. Subsection (3) recognizes that in the present state of law and variety of practices as to letters of credit, no statute can effectively or wisely codify all the possible law of letters of credit without stultifying further development of this useful financial device.... The rules embodied in the Article can be viewed as those expressing the fundamental theories underlying letters of credit. For this reason, the second sentence of subsection (3) makes explicit the court’s power to apply a particular rule by analogy to cases not within its terms, or to refrain from doing so. Under Section 1-102(1) such application is to follow the canon of liberal interpretation to promote underlying purposes and policies. Since the law of letters of credit is still developing, conscious use of that cannon and attention to fundamental theory by the court are peculiarly appropriate. Id. at § 5102 cmt. 2. Section 1103 discusses the interplay between the UCC and common law causes of action and the possibility of displacement and supplementation: “[u]nless displaced by the particular provisions of this title, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other validating or invalidating cause shall supplement its provision.” 13 Pa. Cons.Stat. Ann. § 1103 (West 1984). 2. Definitions Article 5 contains a list of definitions, three of which describe the roles played by Feinberg, Meridian, and Fashion Will. Feinberg, the “customer,” approached Meridian, the “issuing bank,” to procure a letter of credit naming Fashion Will as the “beneficiary.” See Article 5 § 5103(a) (defining “customer” as “[a] buyer or other person who causes an issuer to issue a credit;” “issuer” as “[a] bank or other person issuing a credit;” and “beneficiary” as the “person who is entitled under its terms to draw or demand payment”). Furthermore, Article 5’s definition of “letter of credit” describes the financial device used in this case. See id. (defining “letter of credit” as “[a]n engagement by a bank [Meridian] ... made at the request of a customer [Feinberg]____that the issuer [Meridian] will honor drafts or other demands for payment upon compliance with the conditions specified in the credit”). “Red clause,” however, does not appear in Article 5. A red clause “permits the beneficiary to receive temporary advances from the opening or confirming bank to enable him to make purchases and shipment of the goods described in the credit, said advances to be repaid with interest out of the proceeds of the beneficiary’s drafts and ultimately drawn under the credit.” John F. Dolan, The Law Of Letters Of Credit, “Glossary of Letter of Credit Terms,” G-23 (3d ed. 1996) (“Letters of Credit”). See also Charles del Buston, ICC Guide To Documentary Credit Operations For The UCP 500 49 (1994) (defining a red clause documentary credit as “a Documentary Credit with a special condition incorporated into it that authorises [sic] the Confirming Bank or any other Nominated Bank to make advances to the Beneficiary before presentation of the documents”). Furthermore, Article 5 has codified the independence principle. Specifically, § 5114 addresses the issuing bank’s duties and obligations: (a) Duty of issuer to honor draft or demand. — An issuer must honor a draft or demand for payment which complies with the terms of the relevant credit regardless of whether the goods or documents conform to the underlying contract for sale or other contract between the customer and the beneficiary____ Article 5 § 5114(a). The issuer’s obligation is not without limitation or exception. In the presence of fraud, the issuer’s duty is limited: (b) Nonconforming document or fraud. — Unless otherwise agreed when documents appear on their face to comply with the terms of a credit but a required document does not in fact conform to the warranties made on negotiation or transfer of a document of title (section 7507) or of a security (section 8306) or is' forged ■ or fraudulent or there is fraud the transaction: (1) the issuer must honor the draft or demand for payment if honor is demanded by a negotiating bank or other holder of the draft or demand which has taken the draft or demand under the credit and under circumstances that would make it a holder in due course (section 3302) and in an appropriate case would make it a person to whom a document of title has been duly negotiated (section 7502) or a bona fide purchaser of a security (section 8302); and (2) in all other cases as against its customer, an issuer acting in good faith may honor the draft or demand for payment despite notification from the customer of fraud, forgery or other defect not apparent on the face of the documents but a court of appropriate jurisdiction may enjoin such honor. Article 5 § 5114(b). Application of § 5114 by the Supreme Court of Pennsylvania led to the development of the phrase “fraud in the transaction” to describe instances implicating § 5114(b)(2). See Roman Ceramics, Corp. v. Peoples Nat’l Bank, 714 F.2d 1207, 1213 (3d Cir.1983) (noting the district court’s proper application of the “standards for ‘fraud in the transaction’ or ‘fraud in the documents’ developed by the Pennsylvania Supreme Court in applications of Section 5-114(2)(b) [sic]”). This exception to the independence principle applies narrowly to “situations of fraud in which the wrongdoing of the beneficiary has so vitiated the entire transaction that the legitimate purposes of the independence of the issuer’s obligation would no longer be served.” Id. at 1212 n. 12 (citing Intraworld, 336 A.2d at 324-25). (a). Bank Classifications Article 5 defines three types of banks in addition to the issuing bank. An “advising” bank “gives notification of the issuance of a credit by another bank.” Article 5 § 5103(a). The advising bank plays an incidental role in the international letter of credit transaction limited to transmitting and authenticating information: [t]he adviser, using its knowledge of international banking and communications technology, can verify interbank communications and render the advice with virtual certainty that the original communication from the issuer is genuine. Thus, the adviser facilities the establishment of the credit by permitting the seller to rely on the advice as evidence that the issuer,has indeed undertaken to honor the seller’s draft. The function is simple ... the relationship between the issuer and the adviser is also rather simple. John F. Dolan, The Correspondent Bank in the Letter Of Credit Transaction, 109 Banking L.J. 396, 404 (1993) (“Correspondent Bank”). See also Sound, 819 F.2d at 388 (noting “[w]here the issuing bank and the beneficiary have no prior relationship, another bank may be asked to advise the letter of credit”) (citation omitted); Merchants Bank of New York v. Credit Suisse Bank, 585 F.Supp. 304, 308 (S.D.N.Y.1984) (stating “[t]he advising bank is confined to transmitting information and authenticating the information transmitted”). A “confirming bank” “engages either that it will itself honor a credit already issued by another bank or that such a credit will be honored by the issuer or a third bank.” Article 5 § 5103(a). See also Dibrell Bros. Int’l, S.A. v. Banca Nazionale Del Lavoro, 38 F.3d 1571, 1580 (11th Cir.1994) (stating the confirming bank extends “credit on behalf of the issuing bank and is granted a right to reimbursement against the issuer as a matter of law”); Letters of Credit at G-8 (defining “confirmed credit” as “credit to which a party, usually a bank that does business in the market of the beneficiary, has added its own primary obligation by engaging to pay ... pursuant to the terms of the credit”). The strict obligation undertaken by a confirming bank distinguishes it from the advising bank and likens it to an issuing bank. See Article 5 § 5107(b) (stating “[a] confirming bank by confirming a credit becomes directly obligated on the credit to the extent of its confirmation as though it were its issuer and acquires the rights of an issuer”); Banco Gen. Runinahui, S.A. v. Citibank Int’l, 97 F.3d 480, 482 (11th Cir.1996) (remarking that confirming banks assume “the same obligations as the issuing bank”); Reed Int’l Trading Corp. v. Donau Bank AG, 866 F.Supp. 750, 756 (S.D.N.Y.1994) (stating “[t]he conforming bank is obligated to pay the letter of credit to the beneficiary regardless of how it has chosen to secure its obligation”). The advising bank does not, by definition, incur such an obligation. See Artex, S.R.L. v. Bank One, Milwaukee, Nat’l Ass’n, 801 F.Supp, 228, 230 (E.D.Wis.1992) (finding “[a] bank acting as an advising bank, however, may become directly obligated on an existing letter of credit if it also acts as a ‘confirming bank’ by adding its engagement to the issuing bank’s engagement”) (citations omitted); Letters of Credit ¶ 1.03 (stating “[t]he duties of an adviser, then, are much lighter than those of a confirmer.... [A]n adviser does not assume any obligation to honor the beneficiary’s drafts”). The UCP discusses a type of bank neither addressed nor defined in Article’ 5, the “nominating bank.” The nominating bank is “[t]he bank [designated] in the credit as the bank that will pay, accept, incur a deferred payment obligation, or negotiate the beneficiary’s drafts.” Letters of Credit at G-19 (citation omitted). Under the UCP, [u]nless the Credit stipulates that it is available only with the Issuing Bank, all Credits must nominate the bank (the “Nominated Bank”) which is authorised [sic] to pay, to incur a deferred payment undertaking, to accept Draft(s) or to negotiate ____ Unless the Nominated Bank is the Confirming Bank, nomination by the Issuing Bank does not constitute any undertaking by the Nominated Bank to pay, to incur a deferred payment undertaking, to accept Draft(s), or to negotiate----By nominating another bank, the Issuing Bank authorises [sic] such bank to pay, accept Draft(s) or to negotiate, as the case may be, against documents which appear on their face to be in compliance with the terms and conditions of the Credit and undertakes to reimburse such bank in accordance with the provisions of these Articles. UCP Art. 10(b)(i), (c). See also Chuidian v. Philippine Nat’l Bank, 976 F.2d 561, 562-63 (9th Cir.1992) (referring to both UCP Article 10(c) and UCC § 5-107(1) when examining a nominating bank; noting that “nomination by the issuing bank does not constitute any undertaking by the nominated bank to pay, to accept, or to negotiate____ A confirming bank, by contrast, makes a ‘definite undertaking’ when it adds its confirmation”). (b). obligations Imposed Article 5 contains specific provisions articulating the duties and obligations imposed on the banks defined therein. With respect to advising banks, “[u]nless otherwise specified an advising bank by advising a credit issued by another bank does not assume any obligation to honor drafts drawn or demands made for payment under the credit but does assume obligation for the accuracy of its own statement.” Article 5 § 5107(a). See Sound, 819 F.2d at 390 (noting “the only express obligation of an advising bank is to be accurate in its statement of the letter of credit. Nowhere does the UCC suggest a duty to timely transmit advice”). The same provision speaks to confirming banks: “[a] confirming bank by confirming a credit becomes directly obligated on the credit to the extent of its confirmation as though it were its issuer and acquires the rights of an issuer.” Article 5 § 5107(b). “The obligation, to the extent of the confirmation, is that of an issuer.... The most important aspect of this rule is that a beneficiary who has received a confirmed credit has the independent engagements of both the issuer and the confirming bank.” Article 5 § 5107 cmt. 2. Two sections address the issuing bank. Section 5109 describes the obligation of the issuing bank to its customer, and § 5114 explains the duty and privilege of the issuing bank to honor demands for payment and the exception to that responsibility for fraud in the transaction. (c). Central Asia’s Classification The transaction in the instant case involved a fourth commercial relationship in addition to the three relationships between (1) Feinberg and Fashion Will, (2) Meridian and Feinberg, and (3) Meridian and Fashion Will: specifically, that between Central Asia, and Meridian. While the Court easily finds definitions describing the relationships between Feinberg, Meridian, and Fashion Will — (1) customer and beneficiary, (2) issuer and customer, and (3) issuer and beneficiary, respectively — classifying Central Asia’s role in this transaction, i.e., a bank authorized by the issuing bank under the red clause to advance funds to the beneficiary, presents difficulty. Central Asia characterizes itself as either an advising bank or a nominating bank. (See Def.’s Supp. Mem. at 5-6; Tr. Oral Argument 4/8/97 at 7). Feinberg objects to Central Asia’s self-characterization as an advising bank and points to a reference made by Central Asia’s counsel during Robert Feinberg’s deposition that the Hong Kong and Shanghai Banking Corporation acted as the advising bank in this transaction. (See Def.’s Supp. Mem. Ex. 5 at 113). According to Feinberg, Article 5 does not include a definition of the functions performed by Central Asia and is completely silent as to Central Asia’s duties and responsibilities. Quite clearly, the confirming bank definition is inapplicable. The red clause “authorized” Central Asia to make advances to Fashion Will. To “authorize” means “[t]o empower, to give a right or authority [permission] to act....” Black’s Law Dictionary 133 (6th ed.1991). The authority to perform an act does not, however, create an “obligation” to perform an act. The latter is defined as “[t]hat which a person is bound to do or forbear; any duty imposed by law, promise, contract, relations of society, kindness, etc.” Id. at 1074. The red clause did not impose a duty on Central Asia to advance funds to Fashion Will equivalent to that incurred by the issuer, Meridian. Central Asia enjoyed nothing more than “permission” to furnish the advances. In the absence of such an obligation, Central Asia cannot be a confirming bank. Concededly, the letters of credit and the red clause list the Hong Kong and Shanghai Banking Corporation as the “Advising Bank” and Central Asia as the “Second Advising Bank.” (Def.’s Supp. Mem. Ex. 2 at 1678, 1749, 1763, 1790, 1797, 1812, 1834, 1840, 1845, 1862, 1898). Irrespective of the nomenclature employed by the letter of credit, the Court finds that Central Asia’s self-description as an advising bank is a misnomer because its activities exceeded those of a typical advising bank. Advising banks verify communications and render advice designed to assure the beneficiary of the authenticity of the issuer’s transmission. See Correspondent Bank at 405 (describing advising bank’s role as “critical, but ... above all the role of an information transmitter”). Specifically, after the advising bank receives “a properly keyed telex [from the issuer], it communicates the information in the telex to its customer by advice, usually a letter, from the adviser to the seller reciting the terms of the issuer’s telex or attaching a copy of the telex to the letter.” Id. The Court concludes that Article 5 does not address the role played by Central Asia in this transaction. The definitions delineated in Article 5 describe advising banks, issuing banks, and confirming banks as well as the obligations assumed by each. Those types of banks, however, fail to accurately depict Central Asia’s role in the instant transaction. Central Asia was not acting under any obligation when it made advances under the red clause and it did not advise Fashion Will concerning Meridian’s letters of credit. Furthermore, Central Asia did not actually require Fashion Will to first present the shipping documents, a requirement that would be imposed by an issuing bank or a bank that stepped into the shoes of an issuing bank, i.e., a confirming bank. In conjunction with its subsequent requests to Meridian for reimbursement, Central Asia submitted, via telex and later hard copy, the specified shipping documents to Meridian, i.e., the sight drafts and undertakings by Fashion Will. Indeed, this commercial relationship was supported by consideration. Central Asia received compensation under the red clause for the services it provided. (See Def.’s Mem. Ex. 1). Central Asia’s temporary cash advances were intended to enable Fashion Will to purchase merchandise and ship it to Feinberg, facilitating Fashion Will’s ability to fill Feinberg’s order and expediting this transaction. While Article 5 fails to address the functions performed by Central Asia, and is completely silent as to Central Asia’s duties and responsibilities, the Court cannot say the same with respect to the UCP. The UCP’s description of nominating banks accurately describes Central Asia’s role in this transaction. The nominating bank neither advises a letter of credit nor incurs an obligation to advance funds thereunder. It is, however, authorized, without any undertaking or obligation, to advance funds to the beneficiary and, thereafter, to seek reimbursement. The definition of red clauses envisages the role played by nominating banks. A red clause “permits the beneficiary to receive temporary advances ... said advances to be repaid with interest out of the proceeds of the beneficiary’s drafts and ultimately drawn under the credit.” Letters of Credit at G-23. See also Charles del Buston, ICC Guide To Documentary Credit Operations For The UCP 500 49 (1994) (defining a red clause documentary credit as one authorizing the “Nominated Bank to make advances to the Beneficiary before presentation of the documents”). Accordingly, the definition of a nominating bank best describes the functions performed by Central Asia in the instant case. 3. Does Article 5 Apply? Article 5 fails to address two salient features of this transaction, (1) the addition of the red clause to the letter of credit and (2) Central Asia’s status as a nominating bank. The dispositive question in light of this silence is whether Article 5 still applies to the case sub judice and provides Feinberg with the appropriate avenue of relief. (a). Central Asia’s Position Central Asia maintains that because the documents at issue clearly constitute “letters of credit,” Article 5 governs Feinberg’s claims exclusively. Central Asia suggests that the alternative result, i.e., allowing the common law claims to proceed, would disrupt a longstanding policy of facilitating the flow of international commerce through uniform and predictable letter of credit law. Eliminating Feinberg’s ability to bring common law claims, suggests Central Asia, comports with the parties’ intentions because the letters of credit at issue did not intend that Pennsylvania common law would govern the disputed transactions. Central Asia recognizes that red clauses are not provided for under Article 5. {See Def.’s Supp. Mem. at 2 (noting “no case can be found where a party decided to add a red clause____ [But,] the court [need not] turn to Pennsylvania’s common law of torts for an answer”)). In fact, Central Asia characterizes the red clause as a separate letter of credit built on an additional promise by Meridian to Central Asia for reimbursement, characterizing Central Asia as a beneficiary to a stand-by letter of credit. Nonetheless, Central Asia looks to the scope provisions of Article 5 and notes the intent therein to “express[ ] the fundamental theories underlying letters of credit” and to empower courts “to apply a particular rule by analogy to eases not within its terms.” Article 5 § 5102 emt. 2. The peculiarity injected into Feinberg’s letters of credit by the red clause should not, argues Central Asia, preclude Article 5 from applying because “the documents are so obviously letters of credit that they must be analyzed with the principles espoused under letter of credit, not tort law.” (Def.’s Supp. Mem. at 3). According to Central Asia, the Court could remain in the realm of letter of credit law— without crossing the line into common law— by looking to the UCP, an expression of custom and practice that specifically addresses nominating banks like Central Asia. The UCP, argues Central Asia, furnishes instruction on the rights and obligations of nominating banks and allows Feinberg to pursue an analogous and appropriate remedy without leaving the confines of letter of credit law, and hence Article 5. Central Asia asserts that because Article 5 applies to this transaction, the independence principle protects it from liability. The independence principle, claims Central Asia, is premised on a policy of speedy payment and therefore applies to all banks within the letter of credit transaction, including confirming, advising, nominating, and issuing banks. According to Central Asia, the independence principle required it to honor Fashion Will’s conforming documents regardless of the terms that governed the underlying contract because a beneficiary like Fashion Will who produces proper documents may draw on the letter even if it has not completed the performance described in those documents. Central Asia does not believe it had any obligation to either look past the face of the documents presented or conduct an investigation. Furthermore, Central Asia proclaims that the fraud alleged in this ease did not sufficiently vitiate the transaction to warrant invoking the statutory exception to the independence principle for fraud in the transaction codified in Article 5 § 5114(b)(2) (b). Feinberg’s Position Feinberg objects to being limited to a single cause of action for fraud in the transaction under Article 5, noting that Article 5 is totally silent with respect to both red clauses and banks acting in the capacity that Central Asia did in this transaction. Feinberg directs the Court to Article 5 § 5102, where the Article states its limitations, specifically that it “deals with some but not all of the rules and concepts of letters of credit.” Article 5 § 5102(e) (emphasis supplied). According to Feinberg, the UCC’s general proclamation in the displacement provision, 13 Pa. Cons.Stat. Ann. § 1103, requires this Court to allow him to supplement his cause of action with common law claims because no provision of Article 5 displaces his claims. See 13 Pa. Cons.Stat. Ann. § 1103 (remarking “[ujnless displaced by the particular provisions of this title ... fraud, misrepresentation, duress ... or other validating or invalidating cause shall supplement its provision”) (emphasis supplied). Feinberg also notes the absence, in the UCP, of provisions addressing fraud. Without such provisions, suggests Feinberg, the UCP cannot be considered substantive letter of credit law that would obviate his need to seek common law remedies. Finally, Feinberg contends that in the absence of an obligation undertaken by Central Asia to advance monies to Fashion Will, it constitutes neither an issuing bank nor a confirming bank, and therefore cannot invoke the protections afforded by the independence principle. Instead, argues Feinberg, Central Asia enjoyed total discretion, regardless of the documents presented by Fashion Will. In the presence of such unfettered discretion, Feinberg claims the Court must impose some duty to act responsibly on banks acting in Central Asia’s capacity “so that [Central Asia] does not allow things to happen that it knows are inconsistent with the letter of credit under which it is operating.” (Tr. Oral Argument 4/8/97 at 52). (c). Applicability Conclusion The Court concludes that because Article 5 does not address the salient features of the transaction sub Judice, specifically the red clause and the functions performed by Central Asia as a nominating bank, both the section addressing scope (§ 5102) and the displacement provision of the UCC (13 Pa. Cons.Stat. Ann. § 1103) direct that Feinberg may pursue redress through Pennsylvania common law. If Central Asia were an issuing bank, an advising bank, or a confirming bank, then Feinberg could seek redress through the provisions in Article 5 articulating the obligations imposed on each bank, specifically §§ 5109 and 5114, 5107(a), and 5107(b), respectively. Article 5, however, does not address nominating banks and does not speak to either Central Asia’s obligations as a nominating bank or Feinberg’s rights against nominating banks. The scope provisions of Article 5 support the Court’s conclusion by stating that: (1) Article 5 deals with some, but not all, of the rules and concepts of letters of credit; (2) no statute can effectively or wisely codify all the possible law of letters of credit; and (3) the Court has the power to refrain from applying a particular rule by analogy to cases not within its terms. Furthermore, while the United States Court of Appeals for the Third Circuit recognizes that “the courts of Pennsylvania ... are free to extend Code duties by analogy to parties upon whom they are not expressly imposed,” Sound, 819 F.2d at 390, another body of jurisprudence warns that Article 5’s flexibility “should not be mistaken for approval to range far and wide over the legal landscape in search of legal theories to invoke against the parties to a letter of credit transaction.” Confeccoes Texteis de Vouzela Lda. v. Riggs Nat’l Bank of Washington, D.C., 994 F.2d 851, 854 (D.C.Cir.1993) (citation omitted). See also Instituto Nacional De Comercializacion Agricola (Indeca) v. Continental Ill. Nat’l Bank & Trust Co., 858 F.2d 1264, 1268 (7th Cir.1988) (noting “[i]n large part then adapting letter of credit principles to varying situations in a way that encourages the use of letters of credit is the approved task under Article 5; adapting tort principles not expressly adopted and that tend to discourage the use of such devices is not”). The displacement provisions direct the Court to apply-the law relative to fraud, misrepresentation, or other validating or invalidating causes unless displaced by the particular provisions of the UCC. Since Article 5 does not address the transaction in the instant case, there is no displacement and the Court shall look to common law. The UCP’s mention of nominating banks does not keep Feinberg’s cause of action within the realm of letter of credit law. In Pennsylvania, the UCP records custom and practice. If the Court includes nominating banks within the context of letter of credit law (and Article 5) — which specifically limits its coverage to issuing banks, advising banks, and confirming banks — it would unjustifiably expand the reach of the Article 5 beyond its intended scope. For example, the provision in Article 5 addressing the independence principle and fraud in the transaction, specifically § 5114(b)(2), applies only to issuing and confirming banks. See Banco Gen., 97 F.3d at 482 (applying independence principle to both issuing and confirming bank) (citations omitted); Semetex Corp. v. UBAF Arab Am. Bank, 853 F.Supp. 759, 770 (S.D.N.Y.1994) (requiring issuing and confirming bank to act pursuant to the independence principle) (citing Centrifugal Casting Mach. Co. Inc. v. American Bank & Trust Co., 966 F.2d 1348, 1352 (10th Cir.1992); Wood, 888 F.2d at 318; KMW Int’l v. Chase Manhattan Bank, N.A., 606 F.2d 10, 16 (2d Cir.1979)), aff'd, 51 F.3d 13 (2d Cir.1995). In order to entertain Fern-berg’s fraud claim, the Court would have to forcibly apply § 5114 to nominating banks, entities that Article 5 does not recognize. A nominating bank authorized, but not obligated, to make advances under a red clause should not enjoy the protection the independence principle affords issuing and confirming banks. While the independence principle affords both issuers and confirmers protection, they pay a price for that protection: the assumption of an obligation to honor. The independence principle is pegged to that obligation, and, in the absence of that obligation, the independence principle does not apply. The Court sees no justification arising out of the nature of the letter of credit transaction and the dictates of predictability in international commerce to restrict common law remedies available to the customer (buyer) against a bank — authorized but not obligated by the issuer to make advances against a letter of credit — that has allegedly engaged in fraud, conspiracy, and / or conversion. An examination of two cases brought by customers (like Feinberg) against banks with whom they did not have contact provides support for the Court’s conclusion, specifically, Dibrell and Confeccoes. Dibrell involved a lawsuit filed by the beneficiary of a letter of credit, Dibrell, against a confirming bank that agreed to confirm the letters of credit on a “silent basis.” “A silent confirmation occurs when a bank agrees to confirm a letter of credit, but the agreement to do so does not appear on the face of the letter,” and, before the Dibrell decision, this device was not “recognized in any published opinion in either state or federal court.” Dibrell, 38 F.3d at 1580. In Dibrell, the customer alleged breach of contract, estoppel, negligence, fraud and civil RICO. In determining whether the silent confirmation fell within Article 5, the court concluded it “is not the same device as an Article 5 confirmation and clearly falls outside the operation of the UCC. The parties to the silent confirmation differ, as do the rights and obligations under the confirmation agreement.” Id. Noting that “Georgia courts have also held that common law remedies are available when the theory of recovery falls outside the confines of Article 5,” Dibrell concluded that “a silent confirmation is a situation which is not provided for by Article 5. Therefore, we hold that Article 5 does not preclude recovery for breach of contract to silently confirm on a common law breach of contract theory.” Id. at 1582. In contrast to Dibrell, Confeccoes dealt with entities that fell within the purview of Article 5 and were specifically defined therein. There, a customer brought suit against a confirming bank, presenting three counts: UCC violations, tort claims (negligence, misrepresentation, failure to communicate), and a claim for breach of warranty. Confeccoes first noted that the only duty owed by a confirming bank is to its customer, the issuing bank, and affirmed the district court’s dismissal of the customer’s UCC claim. The customer’s attempt to pursue its claim on the basis of common law tort principles met the same fate. The court noted that the scope provisions in § 5102 indicate that Article 5 deals with some, but not all, of the rules applicable to letters of credit, but it declined to exercise its discretion to expand Article 5’s application because it would contradict the UCC’s goals and policies. Specifically, “[c]ircumventing the explicit statutory scheme by looking to tort principles would undermine [the exchange function of the letter of credit that rests on objective, predictable standards with defined expectations and risks].” Confeccoes, 994 F.2d at 854. Furthermore, Confeccoes objected to the idea of broadening “the confirming party’s duty, as defined by the Code, to include the [customer] — a party with whom it had never dealt” because it would “discourage, rather than encourage, the use of the letter of credit device.” Id. (citation omitted). Essentially, Confeccoes rested on the fact that Article 5 specifically addressed the parties to the transaction and their respective rights, duties, and obligations, obviating the need to go outside its parameters in search of common law remedies. See id. at 852 (stating “[w]e find that the Uniform Commercial Code (‘UCC’) governs the relationship of the parties to this dispute and that under it a confirming bank owes no duty to the [customer]”). The instant case resembles Dibrell. As in the case of a silent confirmation, Article 5 does not address red clauses and nominating banks, forcing Feinberg beyond the purview of Article 5. Unlike Confeccoes, the parties in this transaction are not specifically defined in Article 5, and allowing the pursuit of common law remedies will neither circumvent Article 5’s statutory scheme nor undermine its objectivity and uniformity. Indeed, there is a body of case law that refuses to allow customers to assert causes of action against banks in the absence of privity between the bank and the customer. See Kools v. Citibank, N.A., 872 F.Supp. 67, 72 (S.D.N.Y.1995) (noting “[c]ourts in other circuits have emphasized that in letter of credit transactions, banks have no liability to persons with whom they have had no direct contract”) (citing, inter alia, Confeccoes and Sound). In those cases, however, the banks sued by the customer were specifically defined and addressed by the UCC. See Cenlin Taiwan Ltd. v. Centon, Ltd., 5 F.3d 354, 357 (9th Cir.1993) (finding “any warranty made by [advising bank] ... extends only to [the advising bank’s] immediate purchasers, [the issuing banks, and not the issuing banks’ customer]”); Confeccoes, 994 F.2d at 853 (finding that confirming bank owes statutory duty only to the issuing bank and not to the issuing bank’s customer; since the UCC applies, customer cannot assert common law remedies); Sound, 819 F.2d at 390, 395 (concluding advising bank does not owe potential beneficiary either a contractual, statutory, or tort duty of timely transmission); Auto Servicio San Ignacio, S.R.L. v. Compania Anonima Venezolana De Navegacion, 765 F.2d 1306, 1308 (5th Cir.1985) (disallowing negligence action by customer against bank [Hibernia] that “acted as the advising, confirming, and paying bank” because “to the extent there is a duty under Louisiana tort law, it is the duty of care defined by section 5-109, owed by Hibernia only to its customer on the letter of credit, [the issuing bank]”). Moreover, as will be discussed infra, fraud was neither alleged nor present in any of those cases. Accordingly, use of the red clause and Central Asia’s status as a nominating bank gives rise to rights and obligations that are not contained in Article 5. This transaction falls outside the UCC, and Article 5 does not preclude Feinberg from asserting common law causes of action. D. Feinberg’s Case Feinberg has substantiated his allegations with numerous submissions. In conducting a Rule 56(c) analysis, the Court looks to pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, for sufficient evidence that could convince a reasonable jury to find for Feinberg. The Court also resolves all uncertainties in favor of Feinberg. Before turning to the common law and RICO claims, therefore, the Court will delineate fully Feinberg’s position and will point to the relevant submissions which purportedly substantiate his assertions. Feinberg alleges the following. Products Union Garments, Limited (“Products Union”) is a company owned by the Lam brothers, who also own Fashion Will. (Pl.’s Mem., Robert Feinberg Dep. at 6-10). Both Fashion Will and Products Union owed on loans outstanding to Central Asia. (PL’s Mem. Ex. 107, Ex. 150 (“Customer Line Enquiry” for Fashion Will (April 10, 1995) and Products Union (March 1, 1995) showing outstanding balances); Def.’s Supp. Mem. Ex. 11 (stating Customer Line Enquiry “lists out the out-standings [the amount drawn down from a particular facility] and exposures of the customers”)). Central Asia’s General Manager, Alan Tang, described Fashion Will’s financial instability on July 28, 1995, noting “the liquidity position for the group is rather tight;” in fact, Fashion Will requested that for two months, it might be able to keep for its business all proceeds from export bills. (Pl.’s Mem. Ex. 136; Def.’s Supp. Mem. Ex. 6 at 77). Central Asia grew concerned because while Fashion Will’s liquidity tightened, the collateral securing Fashion Will’s debt diminished in value. (Pl.’s Mem. Ex. 102 (message from Central Asia warning “the collateral values to loan ratios are rather low ranging from Jp0.0% to 68.9%”); Def.’s Supp. Mem. Ex. 6 at 60-61, 68-69). Fashion Will informed Feinberg initially that in order to deal with rising prices of cotton, it needed the red clause inserted into the letters of credit. (Pl.’s Mem. Exs. 10-11; Exs. 13-14). Feinberg agreed to insert the red clause, but included the requirement that Fashion Will submit an undertaking so as to insure that the red clause advances would only be used to purchase raw materials for Feinberg’s finished garments. (Pl.’s Mem., Robert Feinberg Dep. at 175). In connection with the April 10, 1995 red clause advance, Central Asia telexed Meridian, stating “THIS IS TO INF U THAT V HV TDY ADVANCED USD600,000 TO BE-NEF ACCORDING TO YR RED CLAUSE AUTHORIZATION AS STATED IN ABV CREDIT. FOR YR RECORD, V WL SEND U TODAY THE RELATIVE CERTIFIED TRUE COPIES OF BENEF’S DRAFTS N UNDERTAKING.” (Pl.’s Mem. Ex. 114). Thereafter, Central Asia confirmed the telex with a letter dated April 10, 1995 stating ‘WE ENCLOSE HEREWITH THE CERTIFIED TRUE COPIES OF BENEFICIARIES DRAFTS AND UNDERTAKING [where Fashion Will certifies that ‘THESE FUNDS WILL BE USED TO PURCHASE RAW- MATERIAL OF FINISHED PRODUCTS TO ENABLE U.S. TO EFFECT SHIPMENTS OF LADIES WEARING APPAREL’].” (Pl.’s Mem. Ex. 31 (dated April 10, 1995), Exs. 32-35, Ex. 46). Fashion Will did not, however, use the advances in accordance with the undertaking’s certification. Instead, Central Asia applied portions of each red clause advance to repay call loans owed to it by both Fashion Will and ■ Products Union. Fashion Will, however, did not instruct Central Asia to make these applications. (See Pl.’s Mem. Ex. 107 (“Customer Line Enquiry” dated April 10, 1995 documenting $600,000 red clause advance with notation underneath stating “fully settled the 3 call loan ... balance transfer to a/c Products Union for call loan repayment”); Pl.’s Mem. Ex. 112 (Fashion Will’s request to Central Asia for the red clause advance that left blank the “Other Instructions” column that would advise Central Asia what to do with the red clause advances); Pl.’s Mem. Ex. 113 (Central Asia Account Advice dated April 10, 1995 listing “[1] RED CLAUSE ADVANCE AMOUNT USD600,000 @ 7.729 HKD4,637,400,” “[2] AMOUNT TRANSFERRED TO LOANS DEPT. HKD1,024,756.05,” “[3] AMOUNT TRANSFERRED TO LOANS DEPARTMENT FOR A/C OF PRODUCTS UNION HKD3,612,643.95,” and (4) balance to Fashion Will “NIL”); Pl.’s Mem., Alan Tang Dep. at 20,' 31 (stating that none of the $600,000 was available on April 10, 1995 for Fashion Will to use in accordance with the undertaking; “if funds are transferred to the Loans Department at that point in time it is really to pay down the loans for the customers____ Instantly when the funds were transferred to Loans it would be used to pay down loans”); Def.’s Supp. Mem. Ex. 7 at 14-15 (deposition of Nancy Ho, Central Asia employee, stating that the notation “fully settle[d] 3 call loan” on the April 10,1995 Customer Line Enquiry means that “a portion of the U.S. $600,000 was going to be used to pay down the three call loans”)). On the next day, April 11, 1995, Fashion Will received another call loan from Central Asia which it did not use to purchase raw materials to fill Feinberg’s Order. Rather, Fashion Will used the proceeds of the call loan to repay Central Asia for a trust receipt that was due on March 24, 1995. Fashion Will then used the two red clause advances from July 21, 1995 to repay the April 11, 1995 call loan. (Pl.’s Exs. 32-33; Exs. 151— 52; Ex. 107; Ex. 118; Arthur Lloyd Dep. at 33-37 (claiming Fashion Will requested the call loan on April 11, 1995, Central Asia granted the request, the July 21, 1995 red clauses furnished advances of USD56,280.00 and USD132,415.20, and Central Asia applied those advances to the April 11, 1995 call loan)). Fashion Will did not instruct Central Asia to apply the red clauses in this manner. (PL’s Mem. Exs. 116-17). Once again, Central Asia advised Meridian by telex and letter that the red clause advances had been made and enclosed Fashion Will’s undertaking. (PL’s Mem. Ex. 32-33 (letter from Central Asia that states monies were advanced