Sabal Ltd. LP v. Deutsche Bank AG
| Citation | 209 F.Supp.3d 907 |
| Decision Date | 19 September 2016 |
| Docket Number | No. 5:16-CV-300-DAE,5:16-CV-300-DAE |
| Parties | SABAL LIMITED LP, Plaintiff, v. DEUTSCHE BANK AG, Defendant. |
| Court | U.S. District Court — Western District of Texas |
Eric B. Lamons, Stuart M. Riback, Wilk Auslander LLP, New York, NY, John Alexander Huddleston, Forrest Mathew Seger, III, Strasburger & Price, LLP, San Antonio, TX, for Plaintiff.
David L. Goldberg, Katten Muchin Rosenman LLP, New York, NY, for Defendant.
Before the Court is a Motion to Transfer Venue or Dismiss the Amended Complaint filed by Defendant Deutsche Bank AG ("Defendant" or "Deutsche Bank"). (Dkt. # 9.) On September 15, 2016, the Court held a hearing on the motion: Stuart M. Riback of Wilk Auslander LLP and John A. Huddleston of Strasburger & Price, LLP appeared on behalf of Sabal Limited LP ("Plaintiff" or "Sabal"); David L. Goldberg of Katten Muchin Rosenman LLP appeared on behalf of Deutsche Bank. After careful consideration of the memoranda filed in support of and in opposition to the motion, as well as the arguments made at the hearing, the Court, for the reasons that follow, GRANTS the Motion to Transfer (Dkt. # 9).
Sabal is a Texas limited partnership and private investment company based out of San Antonio, Texas, that manages a single family's investments. ("Am. Compl.," Dkt. #3 ¶¶ 3, 8.) Deutsche Bank is a German Aktiengesellschaft1 with its principal place of business in Frankfurt, Germany. (Id. ¶ 4.)
On February 23, 2010, Sabal, Deutsche Bank Securities Inc.2 ("DBSI"), and Deutsche Bank—through its New York affiliate Deutsche Bank Trust Company of Americas—entered into a Securities Account and Control Agreement ("SACA"). ("SACA," Dkt. # 13-10, Ex. 9.) Through the SACA, Sabal established two accounts at DBSI: a primary account "used for trading and margin activities," and a secondary account "used solely to hold financial assets as collateral" in favor of Deutsche Bank (collectively, "the Securities Accounts"). (Id. § 2.2.1.) The SACA required DBSI to honor all instructions from Sabal with respect to financial assets held in the primary account. (Id. ¶ 2.4.1.) However, the SACA prohibited DBSI from honoring Sabal's requests to trade, redeem, or transfer financial assets in the secondary account, and granted Deutsche Bank a first lien on the secondary account. (Id. §§ 2.2.2, 2.4.2.)
The SACA and Sabal's Securities Accounts "shall be governed by, and construed in accordance with, the laws of the State of New York." (Id. § 4.1.) The SACA also contains a forum-selection clause stating:
In any action or proceeding arising out of or relating to this Agreement, the parties hereto hereby irrevocably submit to the exclusive jurisdiction of the courts of the State of New York and the federal courts in New York City ... [Sabal] hereby irrevocably waives any objection [it] may now or hereafter have to the laying of venue in the aforesaid courts, and any claim that any of the aforesaid courts is an inconvenient forum ... [Sabal] further agrees that any action or proceeding by Sabal against [Deutsche Bank] in any respect to any matter arising out of, or in any way relating to, this Agreement or the obligations of [Sabal] hereunder shall be brought only in the State and County of New York.
(Id. § 4.2.) Section Five of the SACA pertains to "Conflict with Other Agreements" and states in relevant part:
In the event of any conflict between this Agreement (or any portion thereof) and any other agreement now existing or hereafter entered into, the terms of this Agreement shall prevail.
(Id. § 5.1.)
On July 15, 2011, Deutsche Bank and Sabal entered into a swap agreement. ("Confirmation," Dkt. # 13-9, Ex. 8.) Under the terms of the swap, Deutsche Bank would pay Sabal a fixed rate of 4.65% on a notional $16 million every quarter from November 1, 2011, through August 1, 2021. (Id. at 2.) In exchange, Sabal would make payments to Deutsche Bank in two separate tranches. First, from August 1, 2011, through November 1, 2015,3 Sabal would pay Deutsche Bank a fixed rate of 2.25% on a notional $16 million every quarter. (Id. ) Second, starting November 1, 2015, through August 1, 2021, Sabal would pay Deutsche Bank a floating rate on a notional $16 million every quarter. (Id. ) The floating rate was determined using a calculation tied to the price of Deutsche Bank's PULSE USD Index, but subject to a 0.00% floor and an 8.50% ceiling.4 (Id. at 2-4.) Deutsche Bank was contractually assigned the duty as "Calculation Agent," who was responsible for calculating the floating rate each quarter. (Id. At 2, 4.)
Sabal and Deutsche Bank memorialized the swap agreement using four separate, industry standard, and integrated instruments. The four instruments are: (1) the International Swap Dealers Association ("ISDA") Master Agreement ("Master Swap Agreement"); (2) the Schedule to the ISDA Master Swap Agreement ("Swap Schedule"); (3) the Credit Support Annex to the Swap Schedule ("CSA"); and (4) the trade confirmation ("Confirmation") (collectively "Swap Documents"). ("Master Swap Agreement," Dkt. # 13-6, Ex. 5; "Swap Schedule," Dkt. # 13-7, Ex. 6; "CSA," Dkt. # 13-8, Ex. 7; Confirmation.) The Swap Documents expressly provide that they "shall be governed by, and construed and enforced in accordance with, the laws of the State of New York." (Master Swap Agreement § 13(a); Swap Schedule Part 4(h).) The Master Swap Agreement also contains a forum-selection clause stating in relevant part:
With respect to any suit, action or proceedings relating to this Agreement ("Proceedings"), each party irrevocably submits ... to the non-exclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City, if this Agreement is expressed to be governed by the laws of the State of New York.
(Master Swap Agreement § 13(b)(i).) Further, the Master Swap Agreement provides that "[n]othing in this Agreement precludes either party from bringing Proceedings in any other jurisdiction." (Id. § 13(b).) Finally, the Master Swap Agreement contains a merger clause stating that it "constitutes the entire agreement and understanding of the parties with respect to its subject matter and supersedes all oral communication and prior writings with respect thereto." (Id. § 9(a).)
The present dispute arises out of two discrete actions allegedly taken by Deutsche Bank. First, Sabal alleges that at the inception of the swap, Deutsche Bank took an "Independent Amount" of $960,000 as collateral from Sabal's accounts held at DBSI. (Am. Compl. ¶¶ 16-17.) The CSA expressly provides that the primary and secondary accounts—the accounts established by the SACA—are used to hold eligible collateral for the swap. However, Sabal contends that the Swap Documents do not provide Deutsche Bank authorization to take the "Independent Amount." (Am. Compl. ¶ 19.) Further, Sabal alleges that Deutsche Bank wrongfully took more collateral by locking Sabal's primary or secondary accounts at DBSI, preventing Sabal from accessing almost $4.5 million. (Id. ¶ 18.) Finally, Sabal alleges that Deutsche Bank fraudulently altered language in the original Confirmation after the parties executed the Swap Documents to give it authority to take an "Independent Amount" as collateral.
The second dispute arose when it came time for Sabal to make payments to Deutsche Bank using the floating rate formula. (Id. ¶¶ 24-29.) Specifically, the dispute concerns the calculation of the floating rate, and the amount of money Sabal owed Deutsche Bank starting November 2015. On July 30, 2015, Deutsche Bank notified Sabal that Sabal was obligated to make a payment in the amount of $152,288.89 on November 2, 2015, as a result of the floating rate calculation formula. (Id. ¶ 24.) However, Sabal contends that Deutsche Bank calculated the floating rate without using the contractually agreed formula. (Id. ¶ 24-25.) Instead, Sabal alleges that Deutsche Bank inserted a "minus 1" into the floating rate equation, resulting in a rate exceeding the ceiling and thus requiring Sabal to pay 8.5% per quarter on the notional $16 million.5 (Id. ¶¶ 23-29.) Sabal argues that the floating rate formula as written in the Swap Documents results in a floating rate below the floor, thus resulting in a floating rate of 0%. (Am. Compl. ¶ 26.) Since the applied floating rate of 8.5% exceeded the 4.65% rate Deutsche Bank was obligated to pay Sabal, the net effect of the swap required Sabal to pay Deutsche Bank 3.85% on the notional $16 million every quarter. Sabal's position is that because the proper calculation of the floating rate results in a rate of 0%, Deutsche Bank should pay Sabal 4.65% every quarter. (Id. ¶¶ 28-29, 32.)
On December 22, 2015, Deutsche Bank sent Sabal a potential default notice because Sabal refused to make payment on November 2, 2015. (Am. Compl. ¶ 30.) To avoid default, Sabal made a good faith payment to Deutsche Bank in the requested amount of $152,288.89. (Id. ) Subsequently, Deutsche Bank sent another notice to Sabal indicating that the floating rate was 8.5% and a payment was due on February 1, 2016. (Id. ¶ 32.)
On March 7, 2016, Sabal demanded that Deutsche Bank return the good faith payment, release the "Independent Amount" collateral worth $960,000, and unlock the remaining collateral in Sabal's secondary account located at DBSI. (Id. ¶ 34.) Deutsche Bank did not comply with Sabal's demand, so Sabal sent to Deutsche Bank a notice of potential default on March 18, 2016. (Id. ¶ 36.) Deutsche Bank countered by serving notices of potential default on Sabal in San Antonio, Texas. (Id. ¶ 37.) On March 24, 2016, Sabal terminated the Master Swap Agreement by delivering notice on Deutsche Bank in Frankfurt, Germany. (Am. Compl. ¶ 38.) Deutsche Bank sent a termination notice and a calculation...
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