Opinion
603215/08.
March 16, 2010.
Attorneys on the matter are Karen E. Wager, Brian S. Weinstein, Rebecca Winters and Jonathan L. Adler of Davis Polk Wardwell LLP for Plaintiff/Counterclaim-Defendant JPMorgan Chase Bank, N.A. and Mitchell Berns and J. Patrick Carley, III of Lane Sash Larrabee LLP for Defendant/Counterclaim-Plaintiff Controladora Comercial Mexicana, S.A.B. de C.V.
This is an action for breach of contract. Beginning in 1999, defendant Controladora Comercial Mexicana S.A.B. De C.V. ("CCM"), Mexico's largest retailer, entered into numerous commercial transactions with JPMorgan Chase Bank, N.A. ("JPMorgan"), known as foreign exchange and interest rate derivatives. CCM also periodically entered into such transactions with several other financial institutions, including Merrill Lynch Capital Markets AG and Merrill Lynch Capital Services, Inc. (collectively, "Merrill"), Goldman Sachs Paris Inc. et Cie ("GS Paris") and Barclays Bank PLC ("Barclays") in order to hedge its exposure to fluctuations in the U.S. dollar/Mexican peso exchange rate.
In October 2008, following a precipitous drop in the value of the Mexican peso in relation to the U.S. dollar, CCM lost money on those transactions, and defaulted in making certain payments to JP Morgan and the other derivatives dealers. At issue in this action are several such foreign exchange or interest rate derivatives transactions entered into between CCM and JPMorgan.
In early November 2008, at the same time this action was filed, Merrill, J. Aron Company, as assignee for GS Paris, and Barclays, which all had separate, outstanding derivatives transactions with CCM, each filed related breach of contract actions against CCM in this court: Merrill Lynch Capital Markets AG and Merrill Lynch Capital Services, Inc. v Controladora Comercial Mexicana S.A.B. De C.V., Index No. 603214/08; J. Aron Company v Controladora Comercial Mexicana S.A.B. De C.V., Index No. 603225/08; and Barclays Bank PLC v Controladora Comercial Mexicana S.A.B. De C.V., Index No. 603233/08 (the "Related Actions"). The Related Actions are almost identical to the instant action. Like the complaint in the instant action, the Related Actions' complaints solely assert causes of action for breach of contract. In its answers to the Related Actions' complaints, CCM interposes exactly the same affirmative defenses and counterclaims.
JPMorgan now moves, pursuant to CPLR 3212, for an order granting it summary judgment awarding (1) $477,590,253 plus interest beginning as of October 10, 2008 at the "Default Rate," as defined in the ISDA Master Agreement; and (2) its attorneys fees and out of pocket expenses. Plaintiffs in the Related Actions have also moved for summary judgment.
For the reasons set forth below, JPMorgan's motion for summary judgment is granted. The motions for summary judgment in the Related Actions are also granted. The decisions granting such motions are filed separately under each index number in the Related Actions.
BACKGROUND
The following facts are derived from the complaint; the second amended answer and counterclaims; the affidavit of Gustavo Campomanes, CCM's former Treasurer and the person directly in charge of CCM's operations to hedge its currency risks; and the affidavit of Lisa A. Shemie, an Executive Director and Assistant General Counsel of the Derivatives Practice Group within the Legal Department of JPMorgan.
CCM is a Mexican corporation based in Mexico City. CCM operates approximately 200 general merchandise and grocery stores and 70 restaurants in Mexico (Campomanes Aff, ¶ 3; Second Amended Counterclaims, ¶ 11). It is one of Mexico's largest retailers and is a competitor of U.S. discount stores such as Wal-Mart Stores, Inc. (Second Amended Counterclaims, ¶ 11).
As an importer of goods priced in dollars, and a borrower of dollar-denominated debt used to finance its operations and growth, CCM is exposed in its business to fluctuations in the exchange rates between the Mexican peso and the U.S. dollar (Campomanes Aff, ¶ 4; Second Amended Counterclaims, ¶¶ 1, 19). In light of its exposure to changes in the peso/dollar exchange rate, CCM has, over the years, entered into numerous currency and other derivatives transactions, including swaps, forwards and options, with various financial institutions (Campomanes Aff, ¶ 6; Second Amended Counterclaims, ¶ 20). CCM also engaged in interest swap transactions designed to reduce debt service costs that are also part of its ordinary business operations (Campomanes Aff, ¶ 6).
CCM admits that it has engaged in such derivatives transactions "[s]ince the 1990's" to hedge its cross-currency risks and to control its debt service costs (Second Amended Counterclaims, ¶ 2). The derivatives dealers CCM did business with included the plaintiffs in the four Related Actions — Barclays, Merrill, GS Paris and JPMorgan — and the pending actions involve a collection of derivatives transactions entered into between CCM and the derivatives dealers (Campomanes Aff, ¶¶ 7, 9). CCM dealt with the derivatives dealers over an extended period of time ( id., ¶ 11).
Parties entering into foreign exchange or interest rate derivatives contracts typically use agreements based on the standard form Master Agreement and Credit Support Annex issued by the International Swaps and Derivatives Association, Inc. ("ISDA"), an organization that promulgates standard form agreements and ancillary documents widely employed in the derivatives market. These contracts contain a series of representations and set forth terms governing the parties' derivatives transactions.
The parties then from time to time enter into derivatives transactions. Each transaction is memorialized in a separate trade confirmation setting forth the specific terms of each particular transaction. Pursuant to the terms of the ISDA Master Agreement, the ISDA Agreement and the confirmations together form a single agreement (ISDA Master Agreement, § 1 [c]).
On November 10, 1999, CCM entered into an ISDA Master Agreement and related credit support annex (together with all schedules and exhibits thereto, the "ISDA Agreement") with JPMorgan (Complaint, ¶ 6; Shemie Aff, ¶ 7, see Exs 1-A through 1-D). Campomanes (CCM's former Treasurer) signed the ISDA Agreement on behalf of CCM (Shemie Aff, ¶ 7).
The ISDA Agreement provided the structure for, and governed, the foreign exchange and other derivatives transactions between the parties ( id., ¶ 8). The ISDA Agreement included representations regarding authority, validity, legality and enforceability (ISDA Agreement, § 3). Specifically, CCM represented that it had the authority to enter into the transactions, that performance under the contract "do[es] not violate or conflict with any law applicable to it" and that its obligations under the contract "constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms" ( id.). The parties also represented to each other that the ISDA Agreement's "representations will be deemed to be repeated by each party on each date on which a Transaction is entered into" ( id.). In addition, the ISDA Agreement defined the triggers for default and the rights of the parties upon a default ( id., §§ 5, 6).
In the Schedule to the ISDA Agreement, which modified certain terms of the ISDA form agreement, the parties specified that New York law governs the transactions (Second Amended Counterclaims, ¶ 18; Schedule, Part 4 [1]). The parties also represented that, with respect to each transaction, each party:
"has made its own independent decisions to enter into that Transaction";
"is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into that Transaction";
"is capable of . . . understanding . . . and accepts the terms, conditions and risks of that Transaction"; and
agrees that "[t]he other party is not acting as a fiduciary for or an advisor to it in respect of that Transaction"
(ISDA Agreement, Part 5 [6]).
The economic terms of particular derivatives transactions between CCM and JPMorgan under the ISDA Agreement were specified in separate written confirmations, each of which was part of, and governed by, the ISDA Agreement (Shemie Aff, ¶ 9; ISDA Agreement, § 1 [c]). The ISDA Master Agreement and all outstanding confirmations together form a single agreement between JPMorgan and CCM (the "Agreement") ( id.).
Subsequent to signing the ISDA Agreement in 1999, CCM entered into a number of foreign exchange and other derivatives transactions with JPMorgan relating to fluctuations in the dollar/peso exchange rate (Complaint, ¶ 9; Shemie Aff, ¶ 11). CCM and JPMorgan agreed to purchase or sell U.S. dollars on specific dates at pre-agreed exchange rates, or what is commonly referred to as the "strike price" (Shemie Aff, ¶ 11).
Prior to October 2008, these transactions settled as agreed in the ISDA Agreement, with payments being made to the appropriate party on the agreed settlement dates — sometimes to JPMorgan and sometimes to CCM ( id., ¶ 12).
In 2008, the peso showed unexpected strength against the dollar (Shemie Aff, ¶ 13). CCM's outstanding trades generally favored CCM only if the peso remained weaker than the dollar, so CCM experienced a mark-to-market loss on those trades (Second Amended Counterclaims, ¶ 34). CCM then entered into foreign exchange transactions that generally would favor CCM if the peso continued to strengthen (the "Transactions") (Shemie Aff, ¶ 13; see Ex 2 [copies of confirmations documenting the Transactions]). Certain of the Transactions related to the dollar/euro exchange rate, rather than the dollar/peso exchange rate ( id.).
Each Transaction was entered into at a strike price that was beneficial to CCM relative to the then-prevailing exchange rate (the "spot rates") (Shemie Aff, ¶ 15). That is, CCM was able to sell dollars in exchange for pesos at a right that was higher than the prevailing rate ( id.). CCM got favorable rates in part because CCM agreed to a provision requiring CCM to sell two times the amount of U.S. dollars owed at the pre-arranged strike prices should the peso weaken against the dollar (Shemie Aff, ¶ 16; see Ex 2). In exchange for the favorable rates, CCM also agreed to an automatic termination provision once CCM had collected a set amount of payments under the Transactions (Shemie Aff, ¶ 17; see Ex 2).
Before October 2008, CCM made money on a number of these transactions, which terminated because CCM earned the pre-agreed maximum amount (Shemie Aff, ¶ 18). Prior to October 2008, CCM never claimed that any of the Transactions were void, unenforceable or otherwise invalid ( id.). Indeed, CCM entered into similar transactions with a number of other institutions (Second Amended Counterclaims, ¶¶ 12-15, 20).
In early October 2008, the value of the U.S. dollar rose dramatically, and unexpectedly, against the Mexican peso ( id., ¶ 22). This increased JPMorgan's mark-to-market exposure to CCM under the ISDA Agreement ( id.).
Pursuant to the ISDA Agreement, CCM had agreed to post collateral and to increase the amount of collateral already posted if it were insufficient to cover the JPMorgan's exposure (ISDA Agreement, ¶ 3). The ISDA Agreement required JPMorgan to calculate CCM's portfolio-wide mark-to-market exposure with respect to all open transactions between the parties ( id., ¶¶ 3, 4). Where the posted collateral was insufficient to cover JPMorgan's exposure, the ISDA Agreement entitled JPMorgan to request additional collateral (Second Amended Answer, ¶ 8; ISDA Agreement, ¶ 3).
Before October 2008, CCM had always complied with its collateral obligations under the ISDA Agreement (Shemie Aff, ¶ 21). On October 3, 2008 and on October 6, 2008, CCM's mark-to-market exposure for all outstanding currency transactions exceeded the agreed-upon threshold, and the collateral posted by CCM became insufficient to cover JPMorgan's exposure to CCM (Complaint, ¶¶ 10-11; Shemie Aff, ¶ 23). On both days, JPMorgan requested in writing that CCM post additional collateral in accordance with the ISDA Agreement (Shemie Aff, ¶ 23). CCM failed to post the required collateral ( id., ¶ 24). CCM's failure to do so breaches the ISDA Agreement (ISDA Agreement, § 5 [a] [iii]).
On October 7, 2008 and October 8, 2008, JPMorgan sent CCM written notices of breach for CCM's failure to post collateral (Complaint, ¶¶ 13, 15; Shemie Aff, ¶ 26, see Exs 3-4). The notices advised CCM that, as a result of CCM's failure to post collateral, if CCM did not cure the breach within two business days, there would be an Event of Default ( id.). Upon an Event of Default, the non-defaulting party may declare an "Early Termination Date," and terminate all outstanding transactions between the parties (ISDA Agreement, § 6 [a]). CCM did not dispute the request for additional collateral, but again failed to post the required collateral (Complaint, ¶¶ 14, 16; Shemie Aff, ¶ 27).
On October 9, 2008, CCM filed a voluntary insolvency petition in Mexico City (Complaint, ¶ 18). This filing constituted another Event of Default under the ISDA Agreement (ISDA Agreement, § 5 [a] [vii]).
On October 10, 2008, JPMorgan sent CCM a notice declaring that an Event of Default had occurred, and that October 10, 2008 was the Early Termination Date under the Agreement for all transactions thereunder (Complaint, ¶ 19; Shemie Aff, ¶ 29, see Ex 5). JPMorgan then liquidated all of the outstanding transactions under the ISDA Agreement and calculated the total amount of JPMorgan's loss after setting off the value of collateral previously provided to JPMorgan by CCM, in each case pursuant to the terms of the ISDA Agreement ( id., ¶ 30; ISDA Agreement, § 6 [e]). On October 16, 2008, JPMorgan notified CCM in writing that its loss after the application of collateral was $477,590,253. JPMorgan demanded payment of that amount (Complaint, ¶ 21; Shemie Aff, ¶ 31). CCM did not dispute JPMorgan's demand or calculation of loss, but failed to remit payment to JPMorgan as required by the Agreement ( id., ¶ 32).
JPMorgan brought this action in November of 2008. The complaint contains a single cause of action for breach of contract, in which JPMorgan seeks "the total amount payable by CCM to [JPMorgan], totaling not less than $477,590,253" (Complaint, Prayer for Relief).
In its answer, CCM originally asserted eleven affirmative defenses and eight counterclaims. In its opposition to the summary judgment motion, CCM asserts that it is no longer interposing the following affirmative defenses: first, subpart (a) (illegal transactions under Mexican law); sixth (illegal betting under General Obligations Law [GOL] § 5-401); seventh (illegal bucket-shop transaction under GOL § 351); eighth (unauthorized transactions); and ninth (unconscionable transactions) (CCM Opp Mem, at 5, n 2). CCM also asserts that it is no longer asserting the following counterclaims: fifth (mistake); sixth (GOL § 5-419 — recovery of collateral seized on illegal betting contracts); and eighth (conversion) ( id.). CCM's remaining counterclaims and defenses are as follows: fraud and negligent misrepresentation (second affirmative defense and first and second counterclaims); breach of fiduciary duty (third affirmative defense and third counterclaim); General Business Law (GBL) § 349 (seventh counterclaim); illegality under Mexican law (first affirmative defense, subparts [b]-[e]); participation in breach of fiduciary duty (fourth affirmative defense and fourth counterclaim); and mitigation of damages (fifth affirmative defense).
After the summary judgment motion was filed, CCM sought leave to amend the answer and counterclaims to add a ninth counterclaim for rescission based on the same claim of illegality under Mexican law as set forth in the first affirmative defense. On January 25, 2010, this court granted CCM's motion. As such, the second amended answer and counterclaims, minus the affirmative defenses and counterclaims withdrawn by CCM in its opposition, is deemed the operative pleading for purposes of resolving the summary judgment motion.
DISCUSSION
Contract interpretation is a question of law, appropriate for resolution on summary judgment ( National Union Fire Ins. Co. of Pittsburgh, Pa. v Robert Christopher Assocs., 257 AD2d 1 [1st Dept 1999]). Summary judgment on a breach of contract action should be granted where, as here, the terms of the contract are clear and unambiguous ( Modell's NY Inc. v Noodle Kidoodle, Inc., 242 AD2d 248 [1st Dept 1997]; Lake Constr. Dev. Corp. v City of New York, 211 AD2d 514 [1st Dept 1995]). Summary judgment is also appropriate when an affirmative defense is patently meritless ( see Citibank, N.A. v Plapinger, 66 NY2d 90, 93 ["the language of (contractual) disclaimer . . . (was) sufficiently specific to foreclose as a matter of law the defenses and counterclaims based on fraud, negligence or failure to perform a condition precedent"]).
Summary judgment is warranted here because the undisputed material facts show a breach of contract and CCM's counterclaims and affirmative defenses fail as a matter of law.
JPMorgan's Breach of Contract Claim
The ISDA Agreement specifically provides that it is governed by New York law ( see ISDA Agreement, Schedule, Part 4 [h]). Under New York law, to establish a right to recover for breach of contract, a party must prove: (1) the existence of a contract; (2) performance of the contract by the injured party; (3) breach by the other party; and (4) damages ( Morris v 702 E. Fifth St. HDFC , 46 AD3d 478 [1st Dept 2007]; Noise in the Attic Prods., Inc. v London Records , 10 AD3d 303 [1st Dept 2004]).
JPMorgan has met its burden of proof on this summary judgment motion by clearly establishing that each of these elements has been satisfied. First, a valid contract exists between the parties ( see Second Amended Answer, ¶¶ 1, 6, 9 [admitting execution of the ISDA Master Agreement and transactions thereunder]). Second, CCM does not dispute that JPMorgan performed its obligations under the ISDA Agreement, and that after CCM's breach, JPMorgan adhered to the actions required and permitted by the ISDA Agreement in giving CCM notices of default, and notice of termination ( see id., ¶¶ 19-21). Third, CCM admits that it breached it obligations under the ISDA Agreement by failing to post the required collateral, and failing to make the requisite payment to JPMorgan ( see id. ¶¶ 14, 16, 18, 19 and 21). Fourth, there is no dispute that, as a direct result of CCM's material breach of the ISDA Agreement, JPMorgan has experienced contractual loss. Together, these undisputed facts establish CCM's liability for breach of contract.
Accordingly, JPMorgan's breach of contract claim is fully supported by CCM's own admissions, and the documentary evidence submitted by JPMorgan.
CCM's Affirmative Defenses and Counterclaims
Each of CCM's affirmative defenses and counterclaims fails as a matter of law. JPMorgan is therefore clearly entitled to summary judgment on its breach of contract cause of action.
1. Fraud and Negligent Misrepresentation
In its first and second counterclaims and second affirmative defense, CCM asserts that JPMorgan induced CCM to enter into the Transactions by allegedly misrepresenting "the potentially ruinous risks" of the Transactions (Second Amended Counterclaims, ¶ 111). CCM's claims, however, are precluded by the unambiguous terms of the ISDA Agreement. Fraudulent inducement requires proof of "[1] a representation of a material fact, [2] the falsity of the representation, [3] knowledge by the party making the representation that it was false when made, [4] justifiable reliance . . . and [5] resulting injury" ( Kaufman v Cohen, 307 AD2d 113, 119 [1st Dept 2003]). "A claim for negligent misrepresentation can only stand where there is a special relationship of trust or confidence, which creates a duty for one party to impart correct information to another, the information given was false, and there was reasonable reliance upon the information given" ( Hudson River Club v Consolidated Edison Co. of NY, Inc., 275 AD2d 218, 220 [1st Dept 2000]). Thus, reasonable reliance is an element of both claims.
It is well settled that claims for fraud and negligent misrepresentation are barred where the party asserting the claim contractually agreed not to rely on the other party's representation ( see Republic Natl. Bank v Hales, 75 F Supp 2d 300 [SD NY 1999], affd 4 Fed Appx 15 [2d Cir 2001] [granting summary judgment where non-reliance provision in ISDA-governed swap agreement precluded finding of reasonable reliance]; Danann Realty Corp. v Harris, 5 NY2d 317, 320 [dismissing fraud claim where "plaintiff has in the plainest language announced and stipulated that it is not relying on any representations as to the very matter as to which it now claims it was defrauded"]; Sorenson v Bridge Capital Corp. , 30 AD3d 1144 , 1145 [1st Dept 2006] [affirming dismissal of fraudulent inducement claim where plaintiff "acknowledged no reliance" on defendant's extra-contractual representations]; Greater NY Mut. Ins. Co. v White Knight Restoration, Ltd. , 7 AD3d 292 [1st Dept 2004] [affirming dismissal of negligent misrepresentation claim because it was unreasonable to rely on certificates in the face of disclaimer language]).
CCM's fraud and negligent misrepresentations counterclaims and affirmative defense fail as a matter of law. In the ISDA Agreement, CCM expressly disclaimed any reliance on JPMorgan in connection with the Transactions and specifically stated that it was able to understand the Transactions. The ISDA Agreement states:
Relationship Between Parties. Each party will be deemed to represent to the other party on the date on which it enters into a Transaction that (absent a written agreement between the parties that expressly imposes affirmative obligations to the contrary for that Transaction):
( a) Non Reliance. It is acting for its own account, and it has made its own independent decisions to enter into that Transaction and as to whether that Transaction is appropriate or proper for it based upon its own judgment and upon advice from such advisors as it has deemed necessary. It is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into that Transaction; it being understood that information and explanations related to the terms and conditions of a Transaction shall not be considered investment advice or a recommendation to enter into that Transaction. No communication (written or oral) received from the other party shall be deemed to be an assurance or guarantee as to the expected results of that Transaction.
( b) Evaluation and Understanding. It is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understands and accepts the terms conditions and risks of that Transaction. It is also capable of assuming and assumes, the risks of that Transaction.
(ISDA Agreement, Schedule, Part 5 [6] [a] and [b]). This same language was included in every confirmation for the Transactions ( see Shemie Aff, Ex 2, § [E]).
Thus, the plain terms of the ISDA Agreement bar CCM's affirmative defenses and counterclaims for fraud and negligent misrepresentation.
In response to the summary judgment motion, CCM contends that there are triable issues of fact as to whether JPMorgan had "superior knowledge of essential facts" concerning the Transactions and fraudulently concealed such facts from CCM (CCM Opp Mem, at 17). In support of this contention, CCM submits Campomanes' affidavit, in which he avers that "I now realize that I did not have the financial expertise in derivatives necessary to understand the potentially ruinous risks that were inherent in the Knock-Out Forwards, Pivots, and TARNS offered to us, and which led to the losses that are the subject of the pending lawsuits" (Campomanes Aff., ¶ 54). Campomanes further avers that "[t]here is no doubt in my mind that the representatives of the Dealers with whom I dealt never fully appreciated the risks inherent in the transactions they offered" ( id., ¶ 55).
However, in Republic Natl. Bank v Hales ( supra), the court rejected this exact argument under almost identical factual circumstances. In Hales, a bank sued an individual for amounts due on, among other things, a swap transaction governed by an ISDA agreement. In seeking to avoid his obligations under that agreement, Hales interposed many of the same defenses and counterclaims as CCM, including counterclaims for fraud and negligent misrepresentation. Applying New York law, the court dismissed these claims and granted the bank summary judgment on its claims. The court therein found it clear that Hales was a sophisticated party:
While Hales has made efforts to pass himself off as a "babe in the woods" who was taken advantage of by an unscrupulous banking institution possessed of superior information and resources, he nevertheless represented himself to [the bank] as a sophisticated businessman. Indeed, the very transcripts offered by Hales in connection with the instant motion reveal that Hales represented himself as having significant experience with swaps and options, and make rather clear Hales' own favorable assessment of his business acumen. He is neither a widow nor an orphan, however, and his effort to avoid his contractual obligations by playing the fool are not well taken
( id. at 313).
Similarly, here CCM admits that it transacted extensively in derivatives with various financial institutions for over 15 years (Campomanes Aff, ¶¶ 21-34). CCM also admits in its counterclaims that the Transaction confirmations themselves described exactly how the transactions would work and the associated risks to the parties, including in a stress scenario of the type experienced in the fall of 2008 (Second Amended Counterclaims, ¶¶ 45-49). None of this information was hidden. As such, any failure to "scrutinize the contractual provisions [Mr. Campomanes] was signing are his fault and his fault alone" ( see Republic Natl. Bank v Hales, 75 F Supp 2d at 314).
CCM next argues that, even if the terms of the contract preclude CCM's claim of reliance, the "special facts" doctrine, as set forth in Swersky v Dreyer Traub ( 219 AD2d 321 [1st Dept 1996], appeal withdrawn 89 NY2d 983), applies here. CCM is wrong. The "special facts" doctrine provides that a party with superior knowledge of essential facts must disclose those facts to the counterparty in that transaction ( id.). However, a party cannot rely on the "special facts" doctrine where, as here, it could have independently ascertained the allegedly concealed facts "through the exercise of ordinary intelligence'" ( id. at 328 [citation omitted]); see also Republic Natl. Bank v Hales, 75 F Supp 2d at 317 [the special facts doctrine does not apply "where the complaining party had access to the information at issue"]). As the Hales court explained in rejecting the "special facts" argument:
The actual terms of the [ISDA] Agreements were certainly not facts uniquely within [the bank's] control, and there is no question but that the ISDA definitions were available for Hales or his counsel to review — had they so wished. Similarly, the risks and advantages to the package of transactions Hales entered with [the bank] could well have been evaluated by Hales himself, and Hales cannot now seek to avoid his obligations on the ground that [the bank] should have told him that he was engaging in a risky or unsuitable transaction
( id.).
CCM further contends that the disclaimers in the ISDA Agreement and Transaction confirmations are "non-specific" and "boilerplate" and therefore cannot defeat an allegation of fraud (CCM's Opp Mem, at 17-18). CCM argues that "a disclaimer will defeat an allegation of fraud only if the disclaimer refers specifically to the very subject matter of the alleged oral misrepresentations" ( id. at 17, citing Danann Realty Corp. v Harris, 5 NY2d 317, supra).
The plaintiff in Hales made this same argument and was squarely, and properly, rejected by the court. The court noted that "as part of the [ISDA] agreements he signed, Hales specifically disclaimed having relied upon [the bank] for investment advice or for an evaluation of the terms of the agreements he was entering" ( 75 F Supp 2d at 316). The court quoted the extensive disclaimers contained in the ISDA agreements that Hales signed, which are substantively identical to the disclaimers in the ISDA Agreement and Transaction confirmations that CCM signed. The court concluded that, "[u]nlike a generic merger' clause standing alone, the waivers signed by Hales were sufficiently particular so as to preclude Hales' present challenge to any statements for which reliance was specifically disclaimed" ( id.; see also CDO Plus Master Fund Ltd. v Wachovia Bank, N.A., No. 07 Civ. 11078(LTS)(AJP), 2009 WL 2033048, *6 [SD NY July 13, 2009] [in enforcing swap transactions governed by an ISDA Master Agreement that included express "non-reliance" disclaimers substantially similar to this case, the court found that "(b)oth the ISDA Schedule and the Credit Support Annex include provisions that are specific to the parties, and thus those documents are inappropriately characterized as boilerplate'"]; Emfore Corp. v Blimpie Assocs., Ltd. , 51 AD3d 434 , 435 [1st Dept 2008] [affirming dismissal of fraud claim where the disclaimers "were not generalized boilerplate exclusions, but were contained in a separate rider, which plaintiff's principal read and initialed, stating specifically that she was not relying on any representations by defendants"]).
Thus, because CCM cannot demonstrate reasonable reliance on any alleged misrepresentation or omission by JPMorgan, CCM's fraudulent inducement and negligent misrepresentation claims cannot stand.
2. Breach of Fiduciary Duty
In its third counterclaim and third affirmative defense, CCM asserts breach of fiduciary duty. This assertion is also precluded by the express terms of the ISDA Agreement.
When parties, particularly sophisticated business entities, enter into an arm's-length business transaction, the terms of their contract govern their relationship ( Northeast Gen. Corp. v Wellington Adv., Inc., 82 NY2d 158, 160 ["Courts look to the parties' agreements to discover, not generate, the nexus of (their) relationship"]; Taylor Bldg. Mgt., Inc. v Global Payments Direct, Inc., 19 Misc 3d 1133[A], 2008 NY Slip Op 50988[U], *7 [Sup Ct, NY County 2008] [relationship of parties in an arm's-length business transaction "is contractual in nature"]; Conwill v Arthur Andersen LLP, 12 Misc 3d 1171[A], 2006 NY Slip Op 51142[U], *12 [Sup Ct, NY County 2006] ["an arm's length transaction with a large financial institution acting as the counterparty . . . will not generally give rise to a fiduciary duty unless one is created by agreement"]).
Accordingly, where the parties' agreement specifically disclaims a fiduciary relationship, no defense of, or claim for, breach of fiduciary duty will lie ( see CIBC Bank Trust Co. (Cayman) Ltd. v Credit Lyonnais, 270 AD2d 138, 139 [1st Dept 2000] [affirming dismissal of breach of fiduciary duty claim where parties represented that they had not acted as "financial advisor or fiduciary"]; AJW Partners, LLC v Cyberlux Corp. , 21 Misc 3d 1109[A], 2008 NY Slip Op 52020[U], *3 [Sup Ct, NY County 2008] [dismissing breach of fiduciary duty counterclaim "in light of the plain contractual language disavowing a fiduciary relationship"]).
In the ISDA Agreement, CCM explicitly disclaimed any fiduciary relationship with JPMorgan. Specifically, in the Schedule to the Master Agreement, CCM acknowledged that JPMorgan "is not acting as a fiduciary for or an advisor to it in respect of that Transaction" (ISDA Agreement, Schedule, Part 5 [6] [c]). Accordingly, because CCM specifically disavowed any fiduciary relationship with JPMorgan, CCM's breach of fiduciary counterclaim and affirmative defense fail as a matter of law.
In response to the summary judgment motion, CCM asserts that JPMorgan possessed "superior knowledge and expertise" that "fostered a special relationship of trust and confidence'" with CCM, which "gave rise to fiduciary duties owed by JPMorgan to CCM" (CCM Opp Mem, at 19). However, it is "patently unreasonable" for a sophisticated party to rely "upon representations contrary to the plain language of the agreements" ( Republic Natl. Bank v Hales, 75 F Supp 2d at 315).
CCM also argues that a "special relationship of trust and confidence" existed because JPMorgan "assiduously cultivated the idea that CCM was its client', and JPMorgan purported to be using its expertise and knowledge to serve the interests of its client'" (CCM Opp Mem, at 19). However, no special relationship arose merely because JPMorgan occasionally referred to CCM as a "client" in term sheets ( see Campomanes Aff, ¶ 13; see Ex 1). The terms sheets state that they are "for discussion purposes only" ( id). Sophisticated entities represented by counsel do not enter into "such a solemn obligation as a fiduciary duty" through such casual means ( L-3 Communications Corp. v OSI Sys., Inc., 283 Fed Appx 830 [2d Cir 2008] [holding that non-binding letter of intent and later oral discussion could not give rise to a knowing agreement to enter into a fiduciary relationship]). A non-binding term sheet cannot modify the terms of the parties' executed agreements ( Jordan Panel Sys. Corp. v Turner Constr. Co. , 45 AD3d 165 [1st Dept 2007]; see also Meyers Assocs., L.P. v Conolog Corp. , 61 AD3d 547 [1st Dept 2009]).
CCM further argues that, as in Apple Records, Inc. v Capitol Records, Inc. ( 137 AD2d 50 [1st Dept 1988]), the "long history of transactions" between CCM and JPMorgan justified imposing a fiduciary relationship on JPMorgan (CCM Opp Mem, at 20). However, the Court's decision in that case rested not just on the length of the relationship between the parties, but on the fact that the Beatles were naive, unknown musicians who "entrusted their musical talents" to Capitol Records and "re[lied] on Capitol Records for the manufacture and distributing of their recordings" ( Apple Records, Inc. v Capitol Records, Inc., 137 AD2d at 57).
Here, in contrast, CCM was a large, sophisticated company before it ever entered into a derivatives transaction with JPMorgan. Indeed, Mr. Campomanes confirms in his affidavit that CCM had engaged in derivatives transactions for approximately eight years before doing its first derivatives transaction with JPMorgan in 2001 (Campomanes Aff, ¶¶ 21-23, 25).
3. GBL § 349
In its seventh counterclaim, CCM alleges that the Transactions are deceptive acts and practices that violate New York General Business Law ("GBL") § 349 (a). GBL § 349 provides that "[d]eceptive acts or practices in the conduct of any business, trade or commerce in the furnishing of any service in this state are . . . unlawful." A claim under GBL § 349 requires that: (1) the allegedly deceptive act or practice be consumer-oriented; (2) objectively, the act or practice be materially misleading to a reasonable consumer; and (3) injury results from the act or practice ( Stutman v Chemical Bank, 95 NY2d 24; see also Goshen v Mutual Life Ins. Co. of NY, 98 NY2d 314). "Such a test . . . may be determined as a matter of law or fact" ( Oswego Laborers' Local 214 Pension Fund v Marine Midland Bank, N.A, 85 NY2d 20, 26).
Here, CCM's claim fails to meet the threshold requirement of alleging "conduct that is consumer oriented" ( New York Univ. v Continental Ins. Co., 87 NY2d 308, 320). To be consumer-oriented, the conduct "must have a broad impact on consumers at large" engaging in small scale transactions ( id.). GBL § 349 was not intended to cover big-dollar financial transactions between private and sophisticated parties, like those at issue here ( Oswego Laborers' Local 214 Pension Fund v Marine Midland Bank, N.A., 85 NY2d at 25 ["(p)rivate contract disputes, unique to the parties . . . (do) not fall within the ambit of the statute"]). Thus, where the "contract at issue was a private, arm's length business transaction between two sophisticated entities, each with substantial prior experience in [the relevant field]," the conduct is not targeted at consumers ( U.W. Marx, Inc. v Bonded Concrete, Inc. , 7 AD3d 856 , 858 [3d Dept 2004] [holding that complaint could not be amended to add a claim under GBL § 349 because "this was a complex private business transaction, not one based on a standard-form contract addressed to consumers generally"]; New York Univ. v Continental Ins. Co., 87 NY2d at 321 [$10 million insurance policy at issue was "not the modest' type of transaction the statute was primarily intended to reach"]; Quail Ridge Assocs. v Chemical Bank, 162 AD2d 917, 920 [3d Dept], appeal dismissed 76 NY2d 936 ["In view of the patently complex nature of this multimillion dollar transaction . . . we conclude that this is a commercial transaction . . . outside the scope of (GBL § 349 [a])"]).
CCM has not alleged that the conduct of JPMorgan was "directed at consumers," a prerequisite for stating a cause of action under the statute ( State of New York v Daicel Chem. Indus., Ltd. , 42 AD3d 301 , 303 [1st Dept 2007] [GBL § 349 "only applies to anti-competitive conduct that is premised on the deception of consumers"]). As previously discussed, the Transactions were arm's-length commercial transactions between sophisticated parties. CCM also clearly had "substantial prior experience" in derivatives trading, as demonstrated by, inter alia, CCM's extensive derivatives trading history. Moreover, CCM admits that the Transactions worked exactly as the confirmations said they would work ( see Second Amended Counterclaims, ¶¶ 45-57), which completely undercuts its claim that the Transactions were "deceptive."
Additionally, courts have routinely rejected attempts to apply GBL § 349 to securities transactions and other financial transactions like the Transactions at issue here ( see Gray v Seaboard Sec., Inc. , 14 AD3d 852 [3d Dept], lv dismissed 4 NY3d 846 [GBL § 349 inapplicable because securities transactions between parties are not consumer oriented]; Fesseha v TD Waterhouse Inv. Servs., Inc., 305 AD2d 268 [1st Dept 2003] [liquidation of securities in a trading account are not covered by GBL § 349]; M T Bank Corp. v Gemstone CDO VII, Ltd., 23 Misc 3d 1105[A], 2009 NY Slip Op 50590[U] [Sup Ct, Erie County], affd as mod 68 AD3d 1747 [4th Dept 2009] [GBL § 349 inapplicable to collateralized debt obligations purchased by a large banking corporation from defendants]).
CCM's claim also fails because GBL § 349 claims cannot succeed where the defendant makes no assurances of any kind, or fully discloses the purportedly deceptive practice ( see Broder v MBNA Corp., 281 AD2d 369, 371 [1st Dept 2001] ["there can be no [GBL § 349] claim when the allegedly deceptive practice was fully disclosed"]). Here, CCM specifically acknowledged in the ISDA Agreement that it understood the terms of Transactions and that it was not relying on any advice of JPMorgan (ISDA Agreement, Schedule, Part 5 [6] [b]).
CCM's claim also fails because GBL § 349 claims cannot succeed where the defendant makes no assurances of any kind, or fully discloses the purportedly deceptive practice ( see Broder v MBNA Corp., 281 AD2d 369, 371 [1st Dept 2001] ["there cant be no [GBL § 349] claim when the allegedly deceptive practice was fully disclosed]). Here, CCM specifically acknowledged in the ISDA Agreement that it understood the terms of Transactions, and that it was not relying on any advice from JPMorgan (ISDA Agreement, Schedule, Part 5 [6] [b]).
Accordingly, CCM's claim under GBL § 349 is insufficient as a matter of law.
4. Illegality of the Transactions Under Mexican Law
CCM expressly represented that terms of the Master Agreement, which govern the Transactions, "do not violate or conflict with any law applicable to [CCM]" (ISDA Agreement, § 3 [a] [iii]). Contrary to that representation, CCM asserts in its first affirmative defense and ninth counterclaim that the Transactions are "illegal and unenforceable under the laws of Mexico" (Second Amended Counterclaims, First Affirmative Defense) and that it "is entitled to rescind all out-of-the-money contracts and transactions that counterclaim defendant has sued on and to the return of all collateral and other assets seized . . . upon the early termination of such transactions in October 2008" ( id., Ninth Counterclaim, ¶ 160). However, the issue of whether or not the Transactions are illegal under Mexican law is irrelevant. The Transactions are enforceable under governing New York law.
It is well-settled that, "[i]n cases alleging a violation of foreign law, the existence of illegality is to be determined by the local law of the jurisdiction where the illegal act is done, while the effect of illegality upon the contractual relationship is to be determined by the law of the jurisdiction which is selected under conflicts analysis" ( Korea Life Ins. Co., Ltd. v Morgan Guar. Trust Co. of NY, 269 F Supp 2d 424, 438 [SD NY 2003]; Dornberger v Metropolitan Life Ins. Co., 961 F Supp 506 [SD NY 1997]). Here, the Schedule to the Master Agreement Part 4 (1) specifically provides that the ISDA Agreement is governed by New York law. Thus, even if CCM could demonstrate that the Transactions are illegal under Mexican law, "New York law governs [as to the issue of] whether defendant is liable to plaintiff under the ISDA Master Agreement and the related derivatives transactions" ( Finance One Public Co. Ltd. v Lehman Bros. Special Fin., Inc., No. 00 CIV 6739(CBM), 2001 WL 1543820, * 1 [SD NY December 4, 2001]).
In Korea Life, a Korean life insurance company argued that foreign exchange swaps and a guaranty were illegal under Korean insurance law. Although the parties submitted opinions from Korean law experts, the court did not reach the issue of illegality under Korean law. The court stated that "the effect of illegality upon a contractual relationship is determined, not by Korean law, but by the law of the jurisdiction which is selected under conflicts analysis" ( id. at 440). The swap agreements at issue, as the Master Agreement here, contained a clause providing that New York law was to govern disputes between the parties.
The Korea Life court held that the derivatives transactions, even if illegal under Korean law, were not invalid under New York law. "Under New York law, an illegal contract malum in se," i.e., inherently immoral, "is unenforceable and will be voided" ( id. at 441). In contrast, "[a] contract that is illegal because performance is malum prohibitum," i.e., its performance would violate certain legal restrictions, "may also be voided if: (1) the contract is still executory; or (2) the parties are not in pari delicto," i.e., the party seeking to avoid enforcement is an innocent victim ( id.).
Applying these rules, the court held that the derivatives transactions at issue were "not evil in themselves ( malum in se)," and although the parties' attempted to "evade Korean regulation and to enter into an inappropriate transaction may have been questionable . . . it d[id] not amount to moral turpitude" ( id.).
The court further held that the agreements could not be voided as malum prohibitum. The court found that the contracts were not executory and the parties were in pari delicto, as both parties "intended to engage in a transaction in violation of Korean law, and endeavored to escape the eyes of regulators by setting up off-shore shell corporations and structuring the transactions as to be virtually impossible to understand to a party not familiar with it" ( id. at 442).
The Korea Life court also emphasized that it was "clear that both parties agreed to the" terms of the relevant contract, and that the plaintiff "was not tricked into engaging in a transaction that was illegal" ( id.). The contracts stated that the plaintiff "had the full power, authority and legal right to enter into and perform' the obligations it took thereunder, despite the fact that such obligations violated Korean law" ( id.). Indeed, "[a]s the Korean party to the agreement, [plaintiff] could be charged with at least as much familiarity, if not more, with Korean law as [defendant], and in making its representations, should have been aware of the potential illegality of its guarantee" ( id.). Accordingly, the illegality claim failed.
Here, CCM admits that the Transactions were not malum in se (CCM Opp Mem., at 15). Instead, it asserts that the Transactions should be voided as malum prohibitum because they are executory, and CCM "is the entirely innocent party with respect to the violations of Mexican law" ( id.).
Contrary to CCM's arguments, the Transactions cannot be voided as malum prohibitum. The Transactions were clearly not executory. "An executory contract is one in which a party binds itself to perform at some time in the future" ( First Intl. Bank of Israel, Ltd. v L. Blankstein Son, Inc., 59 NY2d 436, 443). In opposition to the motion, CCM asserts that the Transactions are executory because it has failed to pay the amounts allegedly owed to JPMorgan. However, the obligation to pay money at some future date does not make a contract executory ( see In re Chateaugay Corp., 130 BR 162, 165-166 [Bankr SD NY 1991] ["A debtor's obligation to pay money, standing alone, is insufficient to render a contract executory"]; Matter of Masters, Inc., 141 BR 13, 17 [Bankr ED NY], affd 149 BR 289 [ED NY 1992] [" a contract is not executory where the only obligation of a party . . . is the payment of money'"] [citation omitted]; see also In re Helm, 335 BR 528, 535 [Bankr SD NY 2006] ["where one party has fully performed, and awaits only payment by the other party . . . an agreement is not executory, as performance is complete, with only payment owed"]).
There is also no dispute that JPMorgan fully performed its obligations under the ISDA Agreement. Neither is there a dispute that JPMorgan exercised its contractual right to declare an early termination date and to terminate all outstanding Transactions under the ISDA Agreement. Once terminated, the ISDA Agreement was not, and could not be, executory.
Moreover, although CCM asserts that it is "the entirely innocent party with respect to the [alleged] violations of Mexican law" (CCM Opp Mem, at 13), it is clearly in pari delicto.Like the ISDA agreements in Korea Life, the Master Agreement here states that CCM had "the power to execute this Agreement and any other Agreement to which it is a party" (ISDA Agreement, § 3 [a] [ii]). Moreover, CCM acknowledged in the ISDA Agreement that it fully understood the transactions and that it was not relying on any advice from JPMorgan (Master Agreement, Schedule, Part 5, [6] [b]). The ISDA Agreement also states that CCM's delivery and performance of those agreements "do not violate or conflict with any law applicable to [CCM]" ( id., § 3 [a] [iii]). Finally, CCM, as the lone Mexican party to the Transactions, "could be charged with as much familiarity, if not more" with Mexican law than Barclays ( Korea Life Ins. Co. v Morgan Guar. Trust Co. of New York, 269 F Supp 2d at 442).
In addition, the Transaction documents and CCM's extensive derivatives trading history clearly establish that CCM was not "entirely innocent." These documents include a fully executed ISDA Agreement containing all of the above-discussed disclaimers and Transaction confirmations repeating key disclaimers in the ISDA Agreement. By its own admission, CCM is a large and sophisticated company with extensive experience in foreign currency swap transactions with JPMorgan and many other counterparties (Second Amended Counterclaims, ¶¶ 11, 23-33).
The foregoing facts render this case distinguishable from Lehman Bros. Commercial Corp. v Minmetals Intl. Non-Ferrous Metals Trading Co. ( 179 F Supp 2d 118 [SD NY 2000]), the principal case on which CCM relies. Minmetals involved a rogue employee who entered into unauthorized transactions and diverted profits to his own account. The court denied Lehman Brothers' motion for summary judgment, holding that there was a "question of fact" as to whether Lehman Brothers entered into derivatives transactions with a Chinese company "with a view to violate' Chinese law" ( id. at 142). The court emphasized that there was evidence that Lehman was aware that the transactions may have been unauthorized and that Lehman's handling of the transactions was "characterized . . . by certain irregularities" ( id. at 131). Importantly, Lehman never obtained an executed ISDA Master Agreement and other documents required under the Master Agreement confirming that the derivatives transactions were authorized under applicable foreign law ( id.).
Here, in contrast, there is no evidence that JPMorgan was aware of any alleged violation of Mexican law or that it entered into the Transactions with "a view to violate" foreign law.
Thus, even if the Transactions are illegal under Mexican law, they cannot be invalidated under New York law. CCM's first affirmative defense and ninth counterclaim cannot defeat JPMorgan's summary judgment motion.
5. Participation in Breach of Fiduciary Duty
In its fourth affirmative defense and fourth counterclaim, CCM asserts that JPMorgan knowingly participated in CCM personnel's alleged breaches of fiduciary duty by "creating, recommending, implementing and benefitting from" allegedly "speculative and risky foreign exchange transactions for CCM that had no hedging risk or management purpose" (Second Amended Counterclaims, ¶ 136). This claim, however, is defeated by the documentation.
A party asserting a claim for aiding and abetting a breach of fiduciary duty must establish: (1) a breach of fiduciary duty; (2) that the participant knowingly induced or participated in the breach; and (3) damages suffered as a result of the breach ( Kaufman v Cohen, supra). The participant must have "actual knowledge" of the underlying breach of fiduciary duty; "constructive knowledge" will not suffice ( Global Minerals and Metals Corp. v Holme , 35 AD3d 93 , 101 [1st Dept 2006], lv denied 8 NY3d 804; see also Kaufman v Cohen, 307 AD2d at 125 ["Constructive knowledge of the breach of fiduciary duty by another is legally insufficient to impose aiding and abetting liability"]). A litigant "may not merely rely on conclusory and sparse allegations that the aider or abettor knew or should have known about the primary breach of fiduciary duty" ( Global Minerals and Metals Corp. v Holme, 35 AD3d at 101-102). Rather, a litigant must allege with specificity that the participant "affirmatively assist[ed], help[ed] conceal or fail[ed] to act when required to do so, thereby enabling the breach to occur" ( Kaufman v Cohen, 307 AD2d at 126).
CCM has not here stated a claim against JPMorgan for participation in a breach of fiduciary duty. CCM has failed to offer any facts that support the assertion that JPMorgan knew of a breach of fiduciary duty by the duly authorized representatives of CCM. To the contrary, Campomanes's affidavit reveals that CCM draped Campomanes with apparent authority ( Hallock v State of New York, 64 NY2d 224 [apparent authority is created when the words or acts of a principal make it reasonable for a third party to believe the agent possesses actual authority, and the third party reasonably relies on this belief), and that CCM ratified the ISDA Agreement and the Transactions ( Matter of Bennett Funding Group, Inc., 336 F3d 94, 100 [2d Cir 2003] ["New York law recognizes the well-established principle of ratification, which imputes an agent's conduct to a principal who condones those acts and accepts the benefits of them'"] [citation omitted]). Specifically, Campomanes admits in his affidavit that he "was the person who was directly in charge of, and responsible on a day-to-day basis for, CCM's operations to hedge its currency and interest-rate risks" (Campomanes Aff, ¶ 2) and that "[w]ith respect to [all of the derivatives transactions with the dealers], all of the relevant documents were signed by me at my office in Mexico City" ( id., ¶ 9).
Further, CCM's conclusory allegations that JPMorgan had "actual knowledge" of and "substantially assisted" alleged breaches of fiduciary duty by CCM personnel are belied by the Transaction documents. CCM represented in the ISDA Agreement, and in the confirmations thereunder, that it had the power "to execute this Agreement and any other Agreement to which it is a party" (ISDA Agreement, § 3 [a] [ii]). These representations made by CCM establish, as a matter of law, the apparent authority of Mr. Campomanes to enter into the Transactions ( see Federal Ins. Co. v Diamond Kankavis Co., 144 AD2d 42, 47 [1st Dept 1987] ["If a corporation endows a high corporate officer with authority and that officer makes representations which are reasonably relied upon by a third party, the corporation may not thereafter simply disclaim those representations because it is benefitted by doing so"]).
For the above reasons, CCM's fourth affirmative defense and fourth counterclaim fail as a matter of law.
6. Mitigation of Damages
In its fifth affirmative defense, CCM asserts that JPMorgan failed to mitigate its damages. However, as the party injured by a breach, JPMorgan was not obligated to use extraordinary remedies or incur extraordinary risk or expense to mitigate damages ( Murray v New York City Transit Auth. , 20 Misc 3d 5 [App Term, 2d Dept 2008]). Rather, a plaintiff is only required to take reasonable steps to avoid additional damages ( Reichert v Spiess, 203 App Div 134 [2d Dept 1922]; see e.g. Korea Life Ins. Co., Ltd. v Morgan Guar. Trust Co. of NY, 2004 WL 1858314, *7 [SD NY 2004] [holding that plaintiff must make only "reasonable efforts" to mitigate and was not required to take "economically unreasonable steps or . . . engage in particular transactions identified by the breaching defendant"]).
JPMorgan, as the party injured by CCM's breach, was thus obligated to do only what the ISDA Agreement contemplated, namely, terminate the Transactions and calculate the Termination Amount on, or within a reasonable period of time after, the Early Termination Date. JPMorgan presents undisputed evidence that it mitigated its damages in accordance with the ISDA Agreement by liquidating all of the outstanding Transactions under the ISDA Agreement, and calculating the Termination Amount within a week after the Early Termination Date ( see Shemie Aff., ¶ 30). JPMorgan properly acted to mitigate its damages, and, as a result, CCM's mitigation of damages defense must be dismissed as a matter of law.
7. CCM's Request for Additional Discovery
Finally, CCM contends that this court should deny summary judgment and permit discovery under CPLR 3212 (f) because "[t]here are many factual issues requiring discovery" (CCM's Opp Mem, at 24), and "because CCM's evidence indicates that information in plaintiff's control may support CCM's defenses" ( id. at 25). The court rejects this contention, as CCM has failed to "demonstrate that the needed proof is within the exclusive knowledge of [JPMorgan], that the claims in opposition are supported by something other than mere hope or conjecture, and that [CCM] has at least made some attempt to discover facts at variance with [JPMorgan's] proof [interior citation omitted]" ( Voluto Ventures, LLC v Jenkens Gilchrist Parker Chapin LLP , 44 AD3d 557 , 557 [1st Dept 2007]).
For the reasons stated herein, JPMorgan's motion for summary judgment is granted. Pursuant to section 11 of the ISDA Agreements, JPMorgan is also entitled to an award of its legal fees and costs. Such an award is appropriate where an express contractual provision so provides ( Levine v Infidelity, Inc. , 2 AD3d 691 [2d Dept 2003]).
However, because CCM contends that JPMorgan has not provided it "with the information necessary to challenge its claim figures," and given the fact that "there are complex factual issues surrounding the calculation of the values of exotic derivatives" (CCM Opp Mem, at 25), summary judgment is granted as to liability only. Consequently, the issue of the total amount of damages due JPMorgan, including interest and the amount of costs and attorneys' fees to which it is entitled, will be referred to a Special Referee to hear and report. The court has considered CCM's remaining arguments, and finds them to be without merit.
ORDER
Accordingly, it is
ORDERED that plaintiff's motion for summary judgment is granted as to liability only; and it is further
ORDERED that the issue of the total amount of damages, including interest, costs and attorneys' fees, to which plaintiff is entitled is referred to a Special Referee to hear and report with recommendations, except in the event of and upon the filing of a stipulation of the parties, as permitted by CPLR 4317, the Special Referee, or another person designated by the parties to serve as referee, shall determine the damages issues; and it is further
ORDERED that this motion is held in abeyance pending receipt of the report and recommendations of the Special Referee and a motion pursuant to CPLR 4403 or receipt of the determination of the Special Referee or the designated referee; and it is further
ORDERED that counsel for the party seeking the reference or, absent such party, counsel for the plaintiff shall, within 30 days from the date of this order, serve a copy of this order with notice of entry, together with a completed Information Sheet upon the Special Referee Clerk in the Motion Support office in Rm. 119 at 60 Centre Street, who is directed to place this matter on the calendar of the Special Referee's Part (part 50R) for the earliest convenient date.
Copies are available in Rm. 119 at 60 Centre Street, and on the Court's website.