666 Fed.Appx. 17 (2nd Cir. 2016), 15-4164-cv, Desarrolladora Farallon S. De R.L. De C.V. v. Cargill Financial Services International, Inc.

Docket Nº:15-4164-cv
Citation:666 Fed.Appx. 17
Party Name:DESARROLLADORA FARALLON S. DE R.L. DE C.V., Plaintiff-Appellant, v. CARGILL FINANCIAL SERVICES INTERNATIONAL, INC., CARVAL INVESTORS, LLC, RAMSFIELD HOSPITALITY FINANCE, LLC, MATTHEW BOGART, THOMAS HUETTNER, Defendants-Appellees. CARGILL, INC., Defendant.
Attorney:For Plaintiff-Appellant: JOHN G. BALESTRIERE, Balestriere Fariello, New York, N.Y. (Jillian L. McNeil, Paul M. Tarr, on the brief). For Defendants-Appellees: MICHAEL I. VERDE, Katten Muchin Rosenman LLP, New York, N.Y. (Philip A. Nemecek, Tenley Mochizuki, on the brief).
Judge Panel:Present: DEBRA ANN LIVINGSTON, RAYMOND J. LOHIER, JR. Circuit Judges, JED S. RAKOFF, District Judge.[*]
Case Date:November 08, 2016
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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666 Fed.Appx. 17 (2nd Cir. 2016)

DESARROLLADORA FARALLON S. DE R.L. DE C.V., Plaintiff-Appellant,

v.

CARGILL FINANCIAL SERVICES INTERNATIONAL, INC., CARVAL INVESTORS, LLC, RAMSFIELD HOSPITALITY FINANCE, LLC, MATTHEW BOGART, THOMAS HUETTNER, Defendants-Appellees.

CARGILL, INC., Defendant. [**]

15-4164-cv

United States Court of Appeals, Second Circuit

November 8, 2016

Editorial Note:

This case was not selected for publication in the Federal Reporter and Not to be Cited as Precedent. (See Federal Rule of Appellate Procedure Rule 32.1)

Appeal from a judgment of the United States District Court for the Southern District of New York (Scheindlin, J.).

For Plaintiff-Appellant: JOHN G. BALESTRIERE, Balestriere Fariello, New York, N.Y. (Jillian L. McNeil, Paul M. Tarr, on the brief).

For Defendants-Appellees: MICHAEL I. VERDE, Katten Muchin Rosenman LLP, New York, N.Y. (Philip A. Nemecek, Tenley Mochizuki, on the brief).

Present: DEBRA ANN LIVINGSTON, RAYMOND J. LOHIER, JR. Circuit Judges, JED S. RAKOFF, District Judge.[*]

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SUMMARY ORDER

UPON DUE CONSIDERATION IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED.

Plaintiff-Appellant Desarrolladora Farallon, S. de R.L. de C.V. (" Farallon" ) appeals from a judgment of the United States District Court for the Southern District

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of New York (Scheindlin, J. ) granting the motion to dismiss by Defendants-Appellees Cargill Financial Services International, Inc. (" Cargill Financial" ), CarVal Investors, LLC (" CarVal," and, together with Cargill Financial, " Cargill" ), Ramsfield Hospitality Finance, LLC (" Ramsfield" ), Matthew Bogart, and Thomas Huettner. Farallon argues that the district court erred (1) in applying New York, rather than Mexican, law in adjudicating the motion to dismiss Farallon's commercial tort and contract claims; (2) even assuming New York law applies, in its application of New York law; and (3) in denying Farallon's motion for post-judgment relief. We assume the parties' familiarity with the underlying facts, the procedural history of the case, and the issues on appeal. Because there is no actual conflict between the relevant laws of New York and Mexico, and because the district court correctly applied this law, we affirm the judgment of the district court.

I. Background 1

This case concerns the fallout from a real estate venture in Cabo San Lucas, Mexico, which Farallon, a Mexican limited liability partnership, and Mexvalo S. de R.L. de C.V. (" Mexvalo" ), a Mexican subsidiary of Cargill Financial, are jointly developing into a high-end resort property. In the middle of the last decade, Farallon, then the owner of the Cabo San Lucas property (" the Property" ), sought equity investment to help fund development. This search identified Cargill as a potential source of capital.

Discussions about the size and structure of the investment led to a preliminary Contribution Agreement, entered into between, as relevant here, Farallon and Cargill Financial (the " Contribution Agreement" ). The Contribution Agreement lays out the basic design of the project and the parties' respective investments. The Property would be held by a fideicomiso, a trust-like entity under Mexican law often used to facilitate foreign investment. The Contribution Agreement slated the parties thereto to be beneficiaries of the fideicomiso (the " Trust" ), with the Trust itself to be governed by the terms of an agreement that the parties agreed to enter into simultaneously with the establishment of the Trust.

Continuing negotiations concluded with the signing, on May 17, 2006, of the CP Project Trust Governance Agreement (the " TGA" ). The TGA differed from the Contribution Agreement in several significant ways, including by substituting Mexvalo for Cargill Financial as both settlor and beneficiary of the Trust. The TGA dictated that the Trust would be managed by a technical committee (the " Technical Committee" ), with one member appointed by each of Farallon and Mexvalo. The TGA also included an expansive integration clause terminating all prior agreements, including, but not limited to, the Contribution Agreement, and requiring that all collateral agreements affecting the TGA be entered into in writing. Disputes relating to the TGA are specifically governed by a choice of law and binding arbitration clause.

To finance construction of the Property, the Trust secured a $65 million construction loan from WestLB, a German bank. Construction delays initially plagued the project and the parties sought further debt financing, but, as a result of the financial crisis, WestLB was unable to fund a scheduled second tranche of the construction loan. Cargill encouraged the Trust to borrow

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from Ramsfield, in which CarVal has an equity stake, as an alternative to WestLB. Ramsfield would later also be retained to manage part of the development project, again at the encouragement of Cargill.

As construction delays continued, the Trust sought several extensions on the WestLB construction loan. By January 7, 2011, however, the process had dragged on long enough that WestLB gave notice that it was holding the Trust in default. WestLB agreed to forbear from foreclosure as the Trust sought substitute financing to enable it to pay off and replace the Construction Loan. During this period, defendant Thomas Huettner sat on the Trust's governing committee as the Mexvalo representative. Farallon alleges that Huettner told Farallon that Cargill intended to oppose any replacement funding for the Construction Loan that permitted Farallon to retain control over the project, and Cargill allegedly refused to support a replacement financing package put together by Farallon. Ultimately, a Cargill affiliate, Cargill Soluciones Empresariales, S.A. de C.V., SOFOM, E.N.R. (" Cargill SOFOM" ), purchased the construction loan from WestLB.

After purchasing the loan, Cargill SOFOM allegedly began to exercise its creditor rights far more aggressively than WestLB had. It allegedly excluded Farallon from the books and records of the Trust and Farallon representatives from the premises and removed Farallon's representative from the Trust's governing committee. Farallon alleges that Cargill SOFOM also exercised its rights under the loan agreement to hold the Trust in default, permitting it to accrue interest at the higher default rate and extract resources from the Trust to the detriment of Farallon.

Farallon also claims that Matthew Bogart, the Mexvalo representative on the Trust's governing committee replacing Huettner, improperly exercised his limited authority by replacing the resort manager that had been jointly selected by Farallon and Mexvalo with a new manager allegedly serving at the behest of Cargill. Finally, Farallon claims that Cargill used its position of control to interfere with Farallon's business relationships, including by using its influence to disrupt Farallon's attempt to reach out to WestLB and by interfering separately with Farallon's relationship with a foundation with which it had a long-term investment relationship.

Farallon filed the complaint initiating this case on January 23, 2015. On April 22 of that year, Mexvalo -- not a defendant here -- commenced arbitration against Farallon under the TGA.2 The arbitration hearing was ultimately scheduled for the following March.

On October 2, 2015, Farallon filed an amended complaint. Farallon's amended complaint alleged that it had entered into a parallel implied joint venture agreement with Cargill that predated the TGA, that this agreement was enforceable under Mexican law, and that, by its actions, Cargill breached that agreement and the good faith and fiduciary duties imposed by Mexican law in connection with the parties' commercial and contractual relationships. Farallon also argued that Cargill's alleged meddling in Farallon's business relationships gives rise to a tortious interference claim.3 The defendants thereafter filed a

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motion to dismiss, which the district court granted on December 3, 2015.

In advance of their scheduled arbitration hearing, Mexvalo and Farallon exchanged witness and expert statements regarding the parties' claims. On March 4, 2016, Farallon filed a motion for post-judgment relief with the district court pursuant to Federal Rules of Civil Procedure 59(e) and 60(b), arguing that certain of these witness statements supported its claims in the action now before this Court. Farallon subsequently was granted leave to withdraw and refile, and, on April 8, 2016, Farallon did so, including in its new motion other testimony from the arbitration and asking, in addition, for leave to amend its complaint pursuant to Federal Rule of Civil Procedure 15(a)(2). On April 29, 2016, the district court denied Farallon's motion in its entirety. Farallon timely appealed.

II. Discussion

A. Motion to Dismiss

Our review of a district court's dismissal for failure to state a claim is de novo, and we accept all factual allegations in the complaint as true and draw all reasonable inferences in plaintiffs' favor. Freidus v. Barclays Bank PLC, 734 F.3d 132, 137 (2d Cir. 2013). To survive a motion to dismiss, the complaint must include sufficient facts which, accepted as true, would state a facially plausible claim for relief. Id. We also review a district court's choice of law determination -- fundamentally, a question of law -- de novo.

Curley v. AMR Corp., 153 F.3d 5, 11 (2d Cir. 1998).

Farallon argues that New York's choice of law rules, which are controlling here, Md. Cas. Co. v. Cont'l Cas. Co., 332 F.3d 145, 151 (2d Cir. 2003), dictate that we apply Mexican, rather than New York, law in evaluating the viability of its...

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