Bankruptcy Decision on Standard for Review of LC Documents Affirmed on Appeal

After an adverse judgment levied civil sanctions against Marshall Spiegel (Debtor) for vexatious and abusive litigation practices, Debtor/Applicant applied for and obtained a UCP600 supersedeas letter of credit from WinTrust Bank (Issuer) in favor of Eugene E. Murphy Jr. (Counsel/Beneficiary), an attorney representing the defendants, to stay execution. When the substantive decision was affirmed on appeal, Counsel/Beneficiary demanded payment on the LC; Issuer honored. After declaring insolvency, Debtor/Applicant filed objections to Issuer’s reimbursement claim in bankruptcy court, alleging Issuer wrongfully honored the demand. The Bankruptcy Court ruled against Debtor/Applicant, finding the presentation was sufficient.[[1]] Debtor/Applicant appealed. The US District Court for the Northern District of Illinois, Hunt, J., affirmed.[[2]]