235 F.3d 1028 (7th Cir. 2000), 00-1960, Praxair v Hinshaw & Culbertson

Docket Nº:00-1960
Citation:235 F.3d 1028
Party Name:Praxair, Inc., Plaintiff-Appellant, v. Hinshaw & Culbertson, Defendant-Appellee.
Case Date:December 20, 2000
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

Page 1028

235 F.3d 1028 (7th Cir. 2000)

Praxair, Inc., Plaintiff-Appellant,


Hinshaw & Culbertson, Defendant-Appellee.

No. 00-1960

In the United States Court of Appeals, For the Seventh Circuit

December 20, 2000

Argued September 27, 2000

Rehearing Denied Jan.17, 2001

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 97 C 3079--Wayne R. Andersen, Judge.

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Before Posner, Coffey, and Kanne, Circuit Judges.

Posner, Circuit Judge.

Praxair, the plaintiff in this diversity suit for legal malpractice governed by Illinois law, appeals from the grant of summary judgment to the defendant, Hinshaw & Culbertson ("Hinshaw" for short), its former law firm. Praxair (actually a predecessor corporation, but we'll suppress that detail for the sake of simplicity) was the defendant in a breach of contract suit brought by Credit Agricole, a French bank. That suit, in which Praxair was represented by Hinshaw, ended in a judgment for Credit Agricole of almost $4 million,

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which we affirmed in Caisse Nationale de Credit Agricole v. CBI Industries, Inc., 90 F.3d 1264 (7th Cir. 1996). In granting summary judgment in the present case, the district judge ruled that Praxair had failed to show that, had it not been for Hinshaw's alleged malpractice, Caisse Nationale would have been decided differently. In other words, Praxair had failed to show that the malpractice had made it any worse off, and if that is right then of course the Hinshaw firm has no tort liability.

Credit Agricole's suit had grown out of a swap contract that it had made with Praxair on February 18, 1991. The contract was negotiated by the New York and Illinois offices of Credit Agricole and the Illinois office of Praxair. During the term of the contract, which was to expire on January 16, 1994, Praxair was to pay Credit Agricole interest at a fixed rate on $35 million (Canadian, not U.S., dollars), while Credit Agricole was to pay Praxair interest at a variable rate, to be reset every three months, tied to the interest rate on Canadian bankers' acceptances (notes). The principal amount was purely notional; that is, it was not transferred, but was simply the base for calculating how much interest each party owed the other. The parties periodically netted their mutual obligations: if the variable rate had risen above the fixed rate, Credit Agricole paid Praxair; if the fixed rate had risen above the variable rate, Praxair paid Credit Agricole. Thus the swap shifted from Praxair to Credit Agricole the risk, both upside and downside, of interest-rate changes during the three-month periods between resettings of the variable rate.

Simultaneous with the swap, Praxair granted Credit Agricole an option, "exercisable between 9:00 a.m. and 5:00 p.m. EST up to and including January 16, 1994," to extend the swap for an additional two years on the basis of the Canadian bankers' acceptance rate on that day. We must mention one more wrinkle. To hedge the interest- rate risk that it was assuming, Credit Agricole made a swap with another bank, Bankers Trust. In that swap Credit Agricole committed to the fixed rate and Bankers Trust to the variable rate. Credit Agricole gave Bankers Trust an option to renew the swap that was essentially identical to the option that Praxair had given Credit Agricole; it too could be exercised up to and including January 16, 1994.

That day was a Sunday. The next day was a business day in Canada but a public holiday under both Illinois and New York law, and both states provide that a contractual obligation which comes due on a holiday may be performed on the next business day without loss of contract rights unless the parties provide otherwise either expressly or by implication. N.Y. General Construction Law sec. 25(1); 5 ILCS 70/1.11. The next business day was Tuesday, January 18. Credit Agricole attempted to exercise the option that day. Praxair took the position that this was too late, thus precipitating the suit by Credit Agricole that Praxair lost.

In that suit Hinshaw had moved for summary judgment on Praxair's behalf without conducting any discovery, discovery that would have brought to light documents suggestive that Credit Agricole itself may have believed that the swaption expired on January 16, not January 18. In support of the motion Hinshaw had submitted merely a skimpy memorandum of law that said little more than that "the Option Agreement expresses the intent that The Option be exercised by 5:00 p.m. EST on January 16, 1994. It wasn't." The memorandum acknowledged, contradicting the flat statement that January 16 was the deadline, that the underlying swap agreement (as opposed to the swaption, that is, the option agreement) defined a "business day," as opposed to a holiday, for obligations denominated in Canadian dollars as any day that was a business day in Toronto, which January 17 was but January 16, a Sunday, was not. So any payments or resets scheduled for January 16

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would not have to be made until the next day. But, Hinshaw argued, they could not be made any later than that. And so the specification of Toronto business days in the underlying swap contract was irrelevant because Credit Agricole had not attempted to exercise the option on January 17 but had waited until the next day. The district court, seconded by a panel of this court, found this argument unpersuasive because "the terms of the option contract evince no intent-- express or implied-- to alter the weekend/holiday rule" of New York and Illinois. Caisse Nationale de Credit Agricole v. CBI Industries, Inc., supra, 90 F.3d at 1274. Given the location of the offices in which the swaption was negotiated and signed, the governing rule had to be the law of one of these two states and it didn't matter which one because they had the same rule. Id. at 1271 n. 3.

Praxair argues that Hinshaw could have made a much better argument for a January 16 or January 17 deadline and that had it done so this court would have reached a different result in the previous case. It is only the second proposition that is in issue here; the district court did not decide whether Hinshaw had actually been negligent. Negligent legal representation is a failure to meet minimum professional standards, e.g...

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