Justia U.S. 2nd Circuit Court of Appeals Opinion SummariesArticles Posted in Business Law
Red Tree Investments, LLC v. PDVSA, Petróleo
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
Siemens Energy, Inc. v. PDVSA
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
NexPoint Diversified Real Est. Tr. v. Acis Cap. Mgmt., L.P.
Plaintiff NexPoint holds $7.5 million in subordinated notes issued by Acis CLO-2015-6 Ltd. (the “Issuer”), as part of a CLO. The Issuer acquired the CLO collateral and conveyed it to a trust under an indenture between the Issuer and U.S. Bank National Association as Trustee (the “Indenture”). Defendant-appellee Acis Capital Management, L.P. (“Acis”) was engaged as the CLO’s portfolio manager pursuant to a Portfolio Management Agreement between the Issuer and Acis (the “PMA”). NexPoint claims that Acis, Terry, and Brigade (together, the “Advisers”) maximized their own profits at the expense of the CLO in violation of fiduciary duties imposed by Section 206 of the IAA. The district court concluded that NexPoint failed to state a claim under Section 215(b). NexPoint appealed, arguing that the District Court erred in limiting Section 215(b)’s application to contracts that require illegal performance, as opposed to lawful contracts performed in an unlawful manner. The Second Circuit affirmed. The court held that under Section 215(b), a contract’s performance involves the violation of the IAA only if performing a contractual duty requires conduct prohibited by the IAA. No such unlawful conduct is required by the contracts NexPoint seeks to rescind. The court further explained that the text and structure of the IAA, interpreted with the benefit of TAMA, Oxford, and other precedent, make clear that a contract’s performance “involves” the violation of the IAA only if performing a contractual duty requires a party to engage in conduct prohibited by the IAA. NexPoint does not seek rescission of any contract requiring a party to engage in conduct prohibited by the IAA. View "NexPoint Diversified Real Est. Tr. v. Acis Cap. Mgmt., L.P." on Justia Law
EMA Financial, LLC v. Chancis
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
Kirschner v. JP Morgan Chase Bank, N.A.
Plaintiff brought a series of claims in New York state court arising out of a syndicated loan transaction facilitated by Defendants, a group of financial institutions. Plaintiff’s appeal presents two issues. The first issue presented is whether the United States District Court for the Southern District of New York had subject matter jurisdiction over this action pursuant to the Edge Act, 12 U.S.C. Section 632. The second issue presented is whether the District Court erroneously dismissed Plaintiff’s state-law securities claims on the ground that he failed to plausibly suggest that notes issued as part of the syndicated loan transaction are securities under Reves v. Ernst & Young, 494 U.S. 56 (1990). The Second Circuit affirmed. The court held that the district court had jurisdiction under the Edge Act because Defendant JP Morgan Chase Bank, N.A. engaged in international or foreign banking as part of the transaction giving rise to this suit. The court also held that the district court did not erroneously dismiss Plaintiff’s state-law securities claims because Plaintiff failed to plausibly suggest that the notes are securities under Reves. View "Kirschner v. JP Morgan Chase Bank, N.A." on Justia Law
FAT Brands Inc. v. Ramjeet et al.
Plaintiff-Appellant FAT Brands Inc. alleged that Defendants engaged in a conspiracy to defraud Plaintiff by misleading it as to the source and certainty of deal funding. On appeal, FAT Brands Inc. argues that the district court (Furman, J.) erred by dismissing claims against Defendants-Appellees Kristina Fields and Mickey Edison for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2); claims against Defendants-Appellees SJ Global Investments Worldwide, Ltd., SJ Global Investments, Ltd., Peter Samuel, and Neil Walsh for failure to state a claim pursuant to Rule 12(b)(6); and separate claims against Defendant-Appellee Wesley Ramjeet for failure to state a claim. The Second Circuit vacated in part and affirmed in part the district court’s decision and remanded. The court held that FAT Brands plausibly alleged a conspiracy in which both Fields and Edison joined and participated. As such, the court turned to the three additional requirements to establish personal jurisdiction over a co-conspirator under New York law (awareness, benefit, and direction or control). The court held that all three are satisfied. Accordingly, the court vacated the district court’s order dismissing Count IV against Fields and Edison. Further, the court wrote that because FAT Brands adequately alleged that the SJ Global Defendants conspired with the PPMT Defendants to commit the fraud, it states a claim against the SJ Global Defendants for the primary fraud tort as well. Accordingly, the court vacated the district court’s order dismissing Count IV against the remaining SJ Global Defendants. View "FAT Brands Inc. v. Ramjeet et al." on Justia Law
Hughes Communications India Private Limited v. The DirecTV Group, Inc.
Plaintiff Hughes Communications India Private Limited (“Hughes India”) appealed from a district court judgment dismissing its indemnification claims against The DirecTV Group, Inc. (“DirecTV”). The case arises out of an asset purchase agreement in which DirecTV spun off fourteen subsidiaries, including Hughes India (the “Agreement”). The Agreement requires DirecTV to indemnify Hughes India for certain contractually defined “Taxes” that accrued before the closing of the spin-off transaction and “Proceedings” that were initiated prior to the closing date. Hughes India sought a declaration that DirecTV must indemnify it for unpaid license fees, interest, and penalties imposed by India’s Department of Telecommunications (the “DOT”). The district court granted summary judgment for DirecTV, concluding that the license fees were not subject to indemnification because they were neither Taxes nor the result of Proceedings against Hughes India as defined by the Agreement. Hughes India appealed. The Second Circuit vacated the district court’s judgment and remanded the case to the district court for further proceedings. The court agreed with Hughes India that under the plain terms of the Agreement, the license fees are Taxes, and the Provisional License Fee Assessment (the “Provisional Assessment”) issued by the DOT initiated a Proceeding against Hughes India. The court concluded that DirecTV is obligated to indemnify Hughes India for license fees, interest, and penalties accrued for tax periods ending on or before closing and for those amounts related to the Provisional Assessment issued for fiscal years 2001 to 2003, which was the only Proceeding initiated before closing. View "Hughes Communications India Private Limited v. The DirecTV Group, Inc." on Justia Law
Magellan Technology, Inc. v. United States Food and Drug Administration
Magellan, a manufacturer of electronic nicotine delivery systems (“ENDS”) products, sought authorization from the FDA to market ENDS under the Family Smoking Prevention and Tobacco Control Act (the “TCA”). The FDA denied Magellan's application related to the company's flavored ENDS products, finding insufficient evidence showing that marketing the pods would be appropriate for the protection of public health, a finding that requires denial of an application under the TCA. Magellan petitioned for review, arguing the FDA action was arbitrary and capricious. Magellan also argues that the FDA exceeded its statutory authority by requiring applicants to demonstrate that their flavored ENDS products are more effective than tobacco-flavored products at promoting cessation or switching from combustible cigarettes to ENDS products.The Second Circuit affirmed. The FDA did not impose a new evidentiary standard on Magellan; therefore, the FDA did not need to provide notice or consider its reliance interests. Thus, the court concluded that the FDA did not act arbitrarily or capriciously. View "Magellan Technology, Inc. v. United States Food and Drug Administration" on Justia Law
Syntel Sterling Best Shores Mauritius, Ltd., et al. v. The TriZetto Grp.,
Plaintiffs appealed from a final judgment entered in favor of Defendants The TriZetto Group, Inc. and Cognizant Technology Solutions Corporation (collectively, “TriZetto”) after a jury trial in district court. Relevant here, the district court ordered and entered judgment that (1) Syntel misappropriated 104 of TriZetto’s trade secrets in violation of the Defend Trade Secrets Act (“DTSA”) and New York law; and (2) TriZetto’s $284,855,192 compensatory damages award was proper under the DTSA. On appeal, Syntel challenges the district court’s judgment with respect to liability and damages. The Second Circuit affirmed and vacated the judgment of the district court and remanded. The court held that the unambiguous terms of the Amended Master Services Agreement (MSA) are clear, and so is the extrinsic evidence: TriZetto did not authorize Syntel to use TriZetto’s trade secrets to compete with TriZetto. Thus, Syntel misappropriated TriZetto’s intellectual property in violation of the DTSA and New York law. Accordingly, the court affirmed the district court’s denial of Syntel’s Rule 50(b) motion on this issue. The court concluded that, as a matter of law, an unjust enrichment award of avoided costs was unavailable under the specific facts of this case. Syntel’s unjust gain was fully “addressed in computing damages for [TriZetto’s] actual loss,” and TriZetto suffered no compensable harm beyond that actual loss. Thus, the court remanded the case for the district court to address the propriety of the two jury awards based on TriZetto’s damages theory of awarding a reasonable royalty: (1) the $142,427,596 New York trade secret misappropriation award and (2) the $59,100,000 copyright infringement award. View "Syntel Sterling Best Shores Mauritius, Ltd., et al. v. The TriZetto Grp.," on Justia Law
Local Union 97, Int’l Bhd. of Elec. Workers, AFL-CIO v. Niagara Mohawk
Defendant Niagara Mohawk Power Corporation (the "Company"), which does business as National Grid, is an electric and natural gas utility that operates throughout New York State. According to Plaintiff Local Union 97, International Brotherhood of Electrical Workers, AFL-CIO (the "Union"), Defendant agreed to provide to certain retired employees, former members of the Union. The Union filed a motion to compel arbitration pursuant to section 301(a) of the Labor Management Relations Act, 29 U.S.C. Section 185(a). The same day, the Company filed a motion for summary judgment dismissing the Complaint. The district court granted the Union's motion to compel arbitration, denied the Company's motion for summary judgment, and ordered that the case be closed. The Second Circuit affirmed, holding that the agreement covers the dispute. The court explained that when it negotiated the Agreement, the Union bargained both for health insurance benefits for retired employees and for a grievance procedure that included, where necessary, access to arbitration. The court explained that it expressed no view on the merits of the Union's grievance; that is a question for the arbitrator. But interpreting the collective bargaining agreement in light of the principles the Supreme Court reaffirmed in Granite Rock, it is clear that the parties intended to arbitrate this dispute. View "Local Union 97, Int'l Bhd. of Elec. Workers, AFL-CIO v. Niagara Mohawk" on Justia Law