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

TIG Insurance Company (“TIG”) appeals from a judgment and order of the district court. TIG asserts that Judge Ramos erred in ordering it to arbitrate a coverage dispute with ExxonMobil Oil Corporation (“Exxon”). Even if it was required to arbitrate, TIG contends that Judge Ramos erred in awarding Exxon prejudgment interest when confirming the arbitral award. After entering judgment, and after TIG had appealed, the district court clerk notified the parties that it was brought to Judge Ramos’s attention that he owned stock in Exxon when he presided over the case. Nothing in the record suggests that Judge Ramos was aware of his conflict at the time he rendered his decisions, and the parties do not suggest otherwise. TIG moved in the district court to vacate the judgment. The case was reassigned to a different judge, who denied the motion to vacate. TIG appealed from that denial as well.The Second Circuit affirmed the district court’s denial of Appellant’s motion to vacate and the district court’s order compelling arbitration, reversed in part its decision granting Exxon’s request for prejudgment interest, and remanded to the district court for further proceedings. The court explained that vacatur was not required because this case presents only questions of law, and a non-conflicted district judge reviewed the case de novo. As to the merits, the court held that the district court did not err in compelling arbitration because the parties were subject to a binding arbitration agreement, but that the district court erred in ordering TIG to pay pre-arbitral-award interest. View "ExxonMobil Oil Corporation v. TIG Insurance Company" on Justia Law

Plaintiff appealed the dismissal of his direct suit against Defendant Brightstar Asia, Ltd. In connection with the sale of his company, Harvestar, to Brightstar Asia, Plaintiff entered into a contract with Brightstar Asia, Harvestar, and his co-founder. The contract provided that conflicted transactions between Brightstar Asia and Harvestar must be on “terms no less favorable to” Harvestar than those of an arms-length transaction. Plaintiff alleged in his complaint that Brightstar Asia engaged in conflicted transactions that rendered his options rights worthless. Those actions, according to Plaintiff, breached both the express terms of the contract and the implied covenant of good faith and fair dealing. The district court dismissed his complaint for raising claims that could be brought only in a derivative suit.   The Second Circuit agreed that Plaintiff can bring a claim for breach of the express conflicted-transactions provision only in a derivative suit. However, the court held that Plaintiff may bring a direct suit for breach of the covenant of good faith and fair dealing because that covenant is based on his individual options rights. Accordingly, the court affirmed in part and vacated in part the district court’s judgment.   The court explained that the inquiry into whether a claim is direct, and a plaintiff, therefore, has “standing” to bring it, is not an Article III standing inquiry Even if the district court were right that Plaintiff’s claims had to be brought in a derivative suit, it should have dismissed the complaint for failure to state a claim. View "Miller v. Brightstar Asia, Ltd." on Justia Law

Plaintiff Bainbridge Fund Ltd. is the beneficial owner of bonds issued by the Republic of Argentina. Argentina defaulted on these bonds back in 2001, but Bainbridge didn’t sue to recover them until 2016. The district court dismissed Bainbridge’s claims as untimely under New York’s six-year statute of limitations for contract actions and the Second Circuit’s nonprecedential decisions. Bainbridge appealed, asking the Second Circuit to reconsider those decisions. Specifically, Bainbridge argues that (1) the twenty-year statute of limitations for recovery on certain bonds under N.Y. C.P.L.R. 34 Section 211(a) applies to its claims against Argentina; and (2) even if the six-year limitations period for contract actions applies, it was tolled under N.Y. Gen. Oblig Law Section 17-101 because Argentina “acknowledged” this debt when it publicly listed the bonds in its quarterly financial statements (the “Quarterly Reports”).   The Second Circuit rejected Plaintiff’s arguments. First, the twenty-year statute of limitations does not apply to claims on Argentine bonds because a foreign sovereign is not a “person” under N.Y. C.P.L.R. Section 211(a). Second, tolling under N.Y. Gen. Oblig. Law Section 17-101 is inapplicable because the Quarterly Reports did not “acknowledge” the debt at issue in a way that reflected an intention to pay or seek to influence the bondholders’ behavior. To the contrary, Argentina repeatedly stated that the bonds “may remain in default indefinitely.” Bainbridge’s claims are thus time-barred. View "Bainbridge Fund Ltd. v. The Republic of Argentina" on Justia Law

Plaintiffs the Civil Service Employees Association (“CSEA”) and certain of its officers and retired former members (collectively, “the CSEA Plaintiffs”) brought a breach of contract action and unconstitutional impairment of contractual obligations claim against various New York State officials (collectively, “the State”), based on the State’s 2011 decision to reduce its contributions to certain retired former employees’ health insurance premiums. The district court granted summary judgment to the State on the CSEA Plaintiffs’ Contract Clause claim.After certifying questions to the New York Court of appeals regarding CBA provisions, the Second Circuit affirmed the district court’s judgment and found that the State’s adjustment of contribution rates for retirees neither breached any of the contractual provisions that the CSEA Plaintiffs identified nor impaired any constitutionally protected contractual obligations. The court reasoned that in light of the answers to its certified questions the CBA provisions that the CSEA Plaintiffs cite unambiguously do not provide a vested lifetime right to fixed contribution rates for retirees, and thus the reduction in contribution rates could not have breached the CBAs. Further, the court held that the State’s adjustment of retirees’ contribution rates did not violate the Contract Clause because the CSEA Plaintiffs lacked any contractual right to a vested lifetime contribution rate. View "Donohue v. The State of New York" on Justia Law

Plaintiff argued that the insurance contract between the parties was governed by a document provided on January 9, 2014, instead of February 19, 2014; that she is entitled to a judgment based on the insurance company’s miscalculation of her copay; and that even if the February 19 document controls, the Patient Protection and Affordable Care Act, 42 U.S.C. Section 18022(c)(1) (“ACA”), mandates that the insurance company must apply the individual out-of-pocket limit rather than the family out-of-pocket limit; and that the generic-brand cost differential Plaintiff paid for her name-brand medication should count toward her out-of-pocket limit. Plaintiff filed a breach of contract claim under ERISA, and the district court granted Defendant judgment on the breach of contract claims under ERISA.   The Second Circuit affirmed the district court’s judgments. The court held that the February document governed the relationship between the parties because Plaintiff was on notice as to its terms. Further, Plaintiff is not entitled to a money judgment for her copay because Defendant agreed to pay Plaintiff the copay differential.   The court also found that the ACA does not provide that the annual limitation on cost-sharing applies to all individuals regardless of whether the individual is covered under an individual “self-only” plan or is covered by a plan that is other than self-only for plans effective before 2016. Finally, the court held that the ACA nor the February document required Defendant to apply the brand-generic cost differential costs to Plaintiff’s out-of-pocket limit. View "Jacqueline Fisher v. Aetna Life Insurance Company" on Justia Law

After Phillips invoked the force majeure clause to terminate its agreement to sell a Rudolf Stingel painting on behalf of JN based on COVID-19 nonessential business restrictions, JN filed suit for breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, and equitable estoppel.The Second Circuit affirmed the district court's grant of Phillips's motion to dismiss the complaint for failure to state a claim, agreeing with the district court that the pandemic constituted "a circumstance beyond the parties' reasonable control" as contemplated by their agreement, rejecting JN's arguments to the contrary. The court also rejected JN's contention that the district court erred in dismissing its claim for breach of another agreement, the Basquiat Agreement. Rather, the court concluded that the Basquiat Agreement was not integrated with the Stingel Agreement and was fully performed where JN signed the Stingel Agreement, and Phillips auctioned off the Basquiat Painting and paid the seller a guaranteed sum. Furthermore, assuming the Basquiat Agreement required Phillips to fully perform the Stingel Agreement, Phillips's proper invocation of the force majeure clause excused its performance. Finally, JN's remaining contentions regarding its implied covenant claim, bad faith claims, and breach of fiduciary duty claim are unavailing. View "JN Contemporary Art LLC v. Phillips Auctioneers LLC" on Justia Law

GenSys appealed the district court's grant of summary judgment in favor of Adar Bays, the holder of a Convertible Redeemable Note securing a loan to GeneSYS. The district court held that the Note's interest rate did not violate the New York State criminal usury law, N.Y. Penal Law 190.40. The Second Circuit then certified two questions to the New York Court of Appeals, which answered as follows: (1) a stock conversion option that permits a lender, in its sole discretion, to convert any outstanding balance to shares of stock at a fixed discount should be treated as interest for the purpose of determining whether the transaction violates N.Y. Penal Law 190.40, the criminal usury law; and (2) if the interest charged on a loan is determined to be criminally usurious under N.Y. Penal Law 190.40, the contract is void ab initio pursuant to N.Y. Gen. Oblig. Law 5-511.The Second Circuit vacated the district court's order because the New York Court of Appeals stressed that the value of any individual floating-price stock conversion option is a question of fact. Accordingly, the court remanded for further proceedings. View "Adar Bays, LLC v. GeneSYS ID, Inc." on Justia Law

Soto, a former Disney employee, alleged that Disney improperly denied her severance benefits upon her termination for physical illness that rendered her unable to work. Soto, a longtime employee had experienced a severe stroke and other medical problems, which left her unable to work. Disney formally terminated Soto’s employment, paid Soto sick pay, short-term illness benefits, and long-term disability benefits but did not pay her severance benefits. She filed suit under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1132(a)(1)(B); (a)(3), alleging that the Plan Administrator improperly determined that she did not experience a qualifying “Layoff” as required for severance benefits.The Second Circuit affirmed the dismissal of her case. Her complaint does not plausibly allege that the interpretation of “Layoff” and resulting denial of severance benefits to Soto were arbitrary and capricious. The Plan Administrator had reasoned bases, relating to taxation, for its interpretation of “Layoff” and consequent denial of severance benefits. The court noted an IRS regulation that defines an “involuntary” “termination of employment” as one arising from “the independent exercise of the unilateral authority of the [employer] to terminate to [employee’s] services, . . . where the [employee] was willing and able to continue performing services.” View "Soto v. Disney Severance Pay Plan" on Justia Law

Plaintiffs filed suit for fraud, rescission, conspiracy, aiding and abetting, fraudulent conveyance, and unjust enrichment alleging that defendants had misrepresented that collateral managers would exercise independence in selecting assets for collateralized debt obligations (CDOs). The district court granted summary judgment in favor of defendants.The Second Circuit affirmed and held that plaintiffs have failed to establish, by clear and convincing evidence, reliance on defendants' representations. In this case, plaintiffs based their investment decisions solely on the investment proposals their investment advisor developed; the advisor developed these detailed investment proposals based on offering materials defendants provided and on the advisor's own due diligence; plaintiffs premised their fraud claims on the advisor's reliance on defendants' representations; but New York law does not support this theory of third-party representations. The court also held that plaintiffs have failed to establish that defendants misrepresented or omitted material information for two of the three CDO deals at issue—the Octans II CDO and the Sagittarius CDO I. The court explained that defendants' representations that the collateral managers would exercise independence in selecting assets were not misrepresentations at all, and defendants did not have a duty to disclose their knowledge of the hedge fund's investment strategy because this information could have been discovered through the exercise of due care. View "Loreley Financing (Jersey) No. 3 Ltd. v. Wells Fargo" on Justia Law

The Second Circuit vacated the district court's grant of summary judgment in favor of Defendants GDB, Stavis, and Kartagener, remanding for further proceedings. This appeal arose from breach of contract and quasi-contract claims brought by plaintiff stemming from defendants' legal representation of plaintiff.The court concluded that the district court erred in granting summary judgment to defendants on plaintiff's breach-of-contract claim because, under New York law, plaintiff can maintain a breach-of-contract claim without any showing that the $100,000 belonged to him. Although plaintiff's quasi-contract claims against Defendant Stavis and GDB do require a showing that he owned the money, the court further concluded that the district court erred in granting summary judgment to those defendants on those claims because there is sufficient evidence in the record from which a jury could conclude that the money indeed belonged to defendant. Finally, the court held that summary judgment for Stavis in his individual capacity was also inappropriate. View "Moreno-Godoy v. Kartagener" on Justia Law