Justia U.S. 2nd Circuit Court of Appeals Opinion Summaries

Articles Posted in Banking
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This case involves Commerzbank AG, a German bank, and U.S. Bank, N.A., an American bank. Commerzbank sued U.S. Bank, alleging that it had failed to fulfill its duties as a trustee for residential mortgage-backed securities (RMBS) that Commerzbank had purchased. The case revolved around three main issues: whether Commerzbank could bring claims related to trusts with "No Action Clauses"; whether Commerzbank's claims related to certificates held through German entities were timely; and whether Commerzbank could bring claims related to certificates it had sold to third parties.The district court had previously dismissed Commerzbank's claims related to trusts with No Action Clauses, granted judgment in favor of U.S. Bank on the timeliness of Commerzbank's claims related to the German certificates, and denied Commerzbank's claims related to the sold certificates. Commerzbank appealed these decisions.The United States Court of Appeals for the Second Circuit affirmed the district court's decisions on the timeliness of the German certificate claims and the denial of the sold certificate claims. However, it vacated the district court's dismissal of Commerzbank's claims related to trusts with No Action Clauses and remanded the case for further proceedings. The court found that Commerzbank's failure to make pre-suit demands on parties other than trustees could be excused in certain circumstances where these parties are sufficiently conflicted. View "Commerzbank AG v. U.S. Bank, N.A." on Justia Law

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The case originates from an Application for Judicial Assistance under 28 U.S.C. § 1782 by Frasers Group PLC ("Frasers"), a British retailer group. Frasers requested to obtain documentary and testimonial evidence from James Patrick Gorman, the former CEO of Morgan Stanley, for use in a lawsuit started in the UK. The district court denied the application, and Frasers appealed this decision.The dispute revolves around a series of transactions Frasers entered into with Saxo Bank A/S related to shares of the fashion company Hugo Boss. Concurrently, Saxo Bank engaged in trades with Morgan Stanley & Co. International PLC, a subsidiary of Morgan Stanley. A margin call was issued by Morgan Stanley, leading to a dispute and the commencement of the lawsuit in the UK.On appeal, the United States Court of Appeals for the Second Circuit affirmed the district court's decision, finding no abuse of discretion. The court considered the factors established by the Supreme Court in Intel Corp. v. Advanced Micro Devices, Inc., which guide district courts when determining whether to grant domestic discovery for use in foreign proceedings under 28 U.S.C. § 1782(a). The court found that the first factor—whether “the person from whom discovery is sought is a participant in the foreign proceeding”— and the fourth factor—whether the discovery request is “unduly intrusive or burdensome”— weighed against granting the Application. Consequently, the court upheld the denial of the Application. View "FRASERS GROUP PLC v. MORGAN STANLEY" on Justia Law

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A group of 18 pension and retirement funds and other investors alleged that 10 large banks conspired to rig U.S. Treasury auctions and boycott the emergence of direct, "all-to-all" trading between buy-side investors on the secondary market for Treasuries. The alleged conspiracies violated Section 1 of the Sherman Act. The investors failed to demonstrate that the banks formed an anticompetitive agreement, which is necessary to plead their antitrust claims. The allegations of wrongful information-sharing amounted to inconsequential market chatter and their statistical analyses were not sufficiently focused on the defendant banks. The United States Court of Appeals for the Second Circuit affirmed the district court's dismissal of the lawsuit, agreeing that the investors failed to plausibly allege that the banks engaged in a conspiracy to rig Treasury auctions or to conduct a boycott on the secondary market. View "In re Treasury Securities Auction Antitrust Litigation" on Justia Law

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Defendant-Appellant Petróleos de Venezuela, S.A. (“PDVSA”), an oil company wholly owned by the Bolivarian Republic of Venezuela, entered into two Note Agreements and a Credit Agreement with the predecessor-in-interest to now-Plaintiff-Appellee Red Tree Investments, LLC (“Red Tree”). PDVSA became delinquent on its obligations under the contracts. Red Tree’s predecessor-in-interest accelerated the outstanding debt. Then Red Tree initiated these actions in Supreme Court, New York County, which Defendants removed to district court. PDVSA claimed that any further payment under the Agreements was impossible and should therefore be excused. The district court granted summary judgment against PDVSA on the grounds that PDVSA had failed to provide sufficient evidence that payment was impossible or in the alternative, that any impediment to payment was not reasonably foreseeable. It therefore entered judgment in favor of Red Tree and imposed post-judgment interest. On appeal, PDVSA contends that the district court erred in concluding that no reasonable trier of fact could find that payment was impossible or that U.S. sanctions were unforeseeable. PDVSA further asserts that the district court incorrectly calculated post-judgment interest.   The Second Circuit affirmed. The court agreed with the district court that payment by PDVSA was not impossible. Further, the court concluded that the district court did not err in its calculation of post-judgment interest. The court explained that under the plain language of the Note and Credit Agreements, the outstanding principal and interest that accrued prejudgment—including both default and ordinary interest—are subject to default interest post-judgment. View "Red Tree Investments, LLC v. PDVSA, Petróleo" on Justia Law

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In January 2017, Defendant-Appellant Petróleos de Venezuela, S.A. (“PDVSA”), an oil company wholly owned by the Bolivarian Republic of Venezuela, entered into a Note Agreement with then-Plaintiff-Appellee Dresser-Rand Company. PDVSA made two of the twelve payments due under the Note Agreement in April and July 2017 but failed to make any subsequent payments. In February 2019, Dresser-Rand declared PDVSA to be in default, accelerated the debt, and initiated this action in Supreme Court, New York County, which Defendants removed to the district court. PDVSA claimed that any further payment was impossible and should therefore be excused. The district court concluded that PDVSA had failed to prove that repayment was impossible. It therefore entered judgment in favor of Dresser-Rand. On appeal, PDVSA contends that the district court erred in concluding that payment was not impossible. PDVSA further asserts that the district court incorrectly calculated post-judgment interest.   The Second Circuit affirmed. The court agreed with the district court that payment by PDVSA was not impossible, and the court further concluded that PDVSA forfeited any arguments relating to post-judgment interest. The court explained that the evidence demonstrates that PDVSA never attempted payment to a different bank or in an alternative currency, nor did it investigate whether this manner of payment would have been truly impossible. Instead of the evidence shows, did nothing. PDVSA cannot benefit from the impossibility defense on speculation. View "Siemens Energy, Inc. v. PDVSA" on Justia Law

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This action concerns loans issued by Plaintiff, EMA Financial, LLC, to a group of companies that were controlled by Defendants. The loan agreements contained so-called “floating-price conversion option” provisions, which gave EMA the right to exercise an option to receive company stock in lieu of cash repayment on the loans. When EMA initially sought partial repayment of the loans through the stock repayment option in 2017, the companies delivered the shares to EMA at the agreed-upon discount rate. EMA sought to exercise the conversion option again. This time, the companies failed to deliver the stock. EMA then brought suit, claiming breach of contract and breach of guaranty as to the loan agreements, and fraudulent conveyance and fraudulent inducement. Defendants asserted as an affirmative defense that the loan agreements were void because the conversion option provisions rendered the agreements criminally usurious under New York law. The district court dismissed this defense and entered judgment in favor of EMA for some of its claims and in favor of Defendants for other. Two Defendants appealed, arguing that the district court’s dismissal of the usury defense at summary judgment should be vacated in light of an intervening change in New York law.   The Second Circuit vacated. The court reasoned that it is also clear that Adar Bays II materially altered the Defendants’ rights by providing them with a newly viable avenue by which they could seek to void the Notes and avoid liability for breaching them. Therefore, even assuming the other necessary conditions for collateral estoppel are met, the Defendants are not precluded from raising a usury defense notwithstanding the Corporate Defendants’ default. View "EMA Financial, LLC v. Chancis" on Justia Law

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Defendant appealed the district court’s judgment awarding damages to Plaintiff to recover funds Defendant received as the result of various alleged fraudulent transfers. The district court entered a default against Defendant as a sanction under Federal Rule of Civil Procedure 37(b) for her repeated failure to comply with discovery orders and ultimately entered a default judgment against Defendant for fraudulent transfers, awarding Plaintiff damages calculated based on three checks Defendant drew from bank accounts she held jointly with her debtor husband.   The Second Circuit affirmed. The court concluded that the district court did not abuse its discretion in determining that Defendant’s noncompliance during discovery warranted a default. The court explained that Defendant failed to respond to interrogatories and produce the documents Plaintiff requested, in violation of the district court’s many orders. This record supports the district court’s determination that Defendant acted willfully, that lesser sanctions would have been inadequate given Defendant’s continued noncompliance after multiple explicit warnings about the consequences of further noncompliance, that Defendant was given ample notice that her continued noncompliance would result in sanctions, including the entry of default judgment, and that her noncompliance spanned more than six months. The court also concluded that Defendant’s withdrawals from accounts she held jointly with her husband constitute fraudulent transfers under Connecticut law. View "Mirlis v. Greer" on Justia Law

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The plaintiffs in this case are American service members who were wounded, and the relatives of service members who were killed or wounded, in terrorist attacks carried out in Iraq from 2004 to 2011 by proxies of the Lebanese militant group Hezbollah. In 2019, victims 20 and their family members sued several Lebanese banks, alleging that the banks aided and abetted the attacks by laundering money for Hezbollah. After Plaintiffs filed suit, the United States Department of the Treasury labelled one of those banks, Jammal Trust Bank (JTB), a Specially Designated Global Terrorist. That designation prompted the Banque du Liban, Lebanon’s central bank, to liquidate JTB and acquire its assets. JTB then moved to dismiss the case against it, on the ground that it was now entitled to sovereign immunity as an instrumentality of Lebanon. The district court denied the motion, holding that a defendant is entitled to foreign sovereign immunity only if it possesses such immunity at the time suit is filed. JTB appealed.    The Second Circuit vacated. The court held that immunity under the Foreign Sovereign Immunities Act, 28 U.S.C. Section 1604, may attach when a defendant becomes an instrumentality of a foreign sovereign after a suit is filed. Further, the court explained that it was the U.S. designation of JTB as a terrorist organization, not any attempt by Lebanon to avoid this lawsuit, that forced the bank into liquidation and public receivership. View "Bartlett v. Baasiri" on Justia Law

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Respondent is a former employee who won a judgment in Argentina's National Court of Labor Appeals against Citibank, N.A. Petitioner, the Argentinian branch of Citibank, N.A., filed a demand for arbitration with the American Arbitration Association and brought the proceedings below. The district court compelled arbitration, preliminarily enjoined the employee from enforcing the Argentinian judgment against Petitioner, and held Respondent in contempt of court. It also denied his motion to dismiss.   The Second Circuit reversed and remanded. The court held that the district court lacked subject matter jurisdiction over the Petition. Therefore, the district court was without authority to issue its orders in this case. The court reversed the district court's orders -- including its order to compel arbitration, the preliminary injunction it entered against Respondent, its order finding Respondent in contempt, and its order requiring Respondent to pay the Branch's attorneys' fees and costs. The court concluded that because the Branch has not shown it enjoys independent legal existence and Citibank has not sought to substitute itself or join this action as the real party in interest, there has been no party adverse to Respondent. Without adverse parties, there can be no subject matter jurisdiction under Article III. View "The branch of Citibank, N.A., established in the Republic of Argentina v." on Justia Law

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Plaintiffs-Appellants are American victims and the relatives and estates of victims of terrorist attacks in Israel between 2001 and 2003. Plaintiffs alleged that Palestine Investment Bank ("PIB") facilitated the attacks, in violation of the Anti-Terrorism Act, 18 U.S.C. 2213-39D. The district court dismissed the case on the ground that it lacked personal jurisdiction over PIB.Federal Rule of Civil Procedure 4(k)(1)(A) permits a federal court to exercise personal jurisdiction over a defendant to the extent allowed by the law of the state in which it sits. New York's long-arm statute, C.P.L.R. 302(a)(1) authorizes personal jurisdiction over a foreign defendant for causes of action that arise out of “transact[ing] any business within the state,” whether in person or through an agent. in this context, transacting business means “purposeful activity—some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State," invoking the benefits of the state's laws.Here, the PIB's actions indicated that it availed itself of the benefits of New York's financial system and that Plaintiff's claim arose from these activities. View "Spetner v. PIB" on Justia Law