| OFSI Fund II, LLC v Canadian Imperial Bank of Commerce |
| 2011 NY Slip Op 01926 [82 AD3d 537] |
| March 17, 2011 |
| Appellate Division, First Department |
| OFSI Fund II, LLC, et al., Appellants, v Canadian ImperialBank of Commerce, Individually and as Administrative Agent and Collateral Agent, et al.,Respondents. |
—[*1] Mayer Brown LLP, New York (Christopher J. Houpt of counsel), for Canadian ImperialBank of Commerce and CIBC, Inc., respondents. Levi Lubarsky & Feigenbaum LLP, New York(J. Kelley Nevling, Jr. of counsel), for Bear Stearns Investments Products, Inc., Bear, Stearns &Co., Inc., and JP Morgan Chase & Co., respondents. Akerman Senterfitt LLP, Fort Lauderdale,Florida (Dee Dee Fischer of the Florida bar, admitted pro hac vice, of counsel), for Baysiderespondents.
Judgment, Supreme Court, New York County (Charles E. Ramos, J.), entered November 9,2009, insofar as appealed from as limited by the briefs, dismissing the complaint in its entirety asagainst defendants Canadian Imperial Bank of Commerce and CIBC, Inc. (the CIBC defendants)and dismissing the breach of fiduciary claims as against Bear Stearns Investment Products, Inc.,Bear, Stearns & Co., Inc., and JP Morgan Chase & Co. (the Bear Stearns defendants) anddefendant Bayside Capital, Inc., also known as Bayside Capital, LLC, and Bayside Recovery I,Inc., unanimously affirmed, with costs. Appeal from order, same court and Justice, enteredOctober 14, 2009, unanimously dismissed, without costs, as subsumed in the appeal from thejudgment. Orders, same court and Justice, entered June 8, 2010 and June 10, 2010, respectively,which, insofar as appealed from as limited by the briefs, denied plaintiffs' motion for renewal,unanimously affirmed, without costs.
Sections 9.6, 10.6, and 10.14 of the credit and note agreements are unambiguous. Therefore,we do not consider the affidavit of plaintiff Orchard First Source Capital, Inc.'s managingdirector about industry custom (see e.g. Greenfield v Philles Records, 98 NY2d 562, 569[2002]). Read together, the above-cited sections show that Canadian Imperial Bank ofCommerce, as administrative and collateral agent, did not breach the agreements by releasing alien on collateral that was the subject of a sale; the requisite lenders had consented to such sale.[*2]We decline to consider plaintiffs' contention—notraised until oral argument on their motion to renew and reargue—that Canadian ImperialBank of Commerce failed to establish that it had complied with section 10.14. Similarly, wedecline to consider plaintiffs' argument—made for the first time in a footnote in theirappellate reply brief—that Canadian Imperial Bank of Commerce breached section 2.4 ofthe agreements by failing to distribute net asset sale proceeds in accordance with that section (see e.g. Shia v McFarlane, 46 AD3d320 [2007]).
Plaintiffs are correct that a tort claim is not always duplicative of a contract claim (seee.g. Sommer v Federal Signal Corp., 79 NY2d 540, 550-553 [1992]). However, their claimsfor gross negligence/willful misconduct sound in contract rather than tort. First, absent the creditand note agreements, Canadian Imperial Bank of Commerce would have had no duty to plaintiffsto refrain from releasing a lien on collateral (see id. at 551; Alitalia Linee AereeItaliane, S.p.A. v Airline Tariff Pub. Co., 580 F Supp 2d 285, 293 [SD NY 2008]). Contraryto plaintiffs' contention, Canadian Imperial Bank of Commerce did not assume all the duties ofan agent under New York law. Section 9.2 (A) of the credit and note agreements explicitly limitsthe duties of the administrative agent and collateral agent (see G.K. Alan Assoc., Inc. v Lazzari, 44 AD3d 95, 101 [2007],affd 10 NY3d 941 [2008]). Second, the injury is "not personal injury or property damage;there was no abrupt, cataclysmic occurrence . . . plaintiff is essentially seekingenforcement of the bargain" (see Sommer, 79 NY2d at 552). With respect to plaintiffs'willful misconduct claim, merely alleging that a breach of contract was "maliciously intended"does not give the breach of contract claim a separate and independent identity as a tort claim(La Fleur v Montgomery, 70 AD2d 545, 546 [1979]).
Plaintiffs submitted a series of e-mails on the motion to renew. While these e-mails may havebeen newly discovered by plaintiffs, they would not have changed the prior determination(see CPLR 2221 [e]). Plaintiffs could not use the e-mails to create an ambiguity in theclear and unambiguous credit and note agreements. These agreements were the basis fordismissing the contract claims (see e.g. W.W.W. Assoc. v Giancontieri, 77 NY2d 157,163 [1990]). Similarly, the e-mails would not have affected the dismissal of the grossnegligence/willful misconduct claim.
On appeal, plaintiffs do not explain why New York rather than Delaware law should apply totheir claim that the directors of Protocol (a Delaware corporation) breached their fiduciary dutyto the corporation. The motion court correctly found that plaintiffs, as creditors, could not assertbreach of fiduciary duty as a direct claim, even if Protocol was insolvent (see North Am.Catholic Educ. Programming Found., Inc. v Gheewalla, 930 A2d 92, 94 [Del 2007]). In boththe amended complaint and the proposed second amended complaint, plaintiffs assert claims ascreditors rather than shareholders. Moreover, at oral argument, plaintiffs conceded that they weresuing because Canadian Imperial Bank of Commerce had released the creditors' lien.
Plaintiffs' contention that the court's decision conflicts with Edgewater Growth CapitalPartners, L.P. v H.I.G. Capital, Inc. (2010 WL 720150, 2010 Del Ch LEXIS 42 [2010]) iswithout merit. The Delaware Chancery Court denied the defendants' motion to dismiss "largely"because of the "great deal of evidence outside of the pleadings" that they submitted (2010 WL720150, *1, 2010 Del Ch LEXIS 42, *3), not because it agreed with the plaintiffs' substantivearguments.
Plaintiffs never requested leave of the motion court to replead their breach of fiduciary dutyclaim as a derivative claim, and thus waived the argument that they should be permitted to do so(see Gheewalla, 930 A2d at 97). As there is no breach of fiduciary duty claim, there canbe [*3]no claim for aiding and abetting breach of fiduciary duty.This is true regardless of whether Delaware or New York law applies (see e.g. Trenwick Am.Litig. Trust v Ernst & Young, L.L.P., 906 A2d 168, 215 [Del Ch 2006], affd 931A2d 438 [2007]; Fiala v MetropolitanLife Ins. Co., 6 AD3d 320, 323 [2004]). Concur—Gonzalez, P.J., Friedman,Catterson, Renwick and Abdus-Salaam, JJ.