Caisse Nationale de Credit Agricole v. CBI Industries, Inc.

• Decision Date: 20 August 1996
• Docket Number: Nos. 95-2814,95-2708,s. 95-2814
• Citation: 90 F.3d 1264
• Parties: CAISSE NATIONALE DE CREDIT AGRICOLE, a French banking corporation, Plaintiff-Appellee, Cross-Appellant, v. CBI INDUSTRIES, INCORPORATED, a Delaware corporation, Defendant-Appellant, Cross-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1264

90 F.3d 1264

CAISSE NATIONALE DE CREDIT AGRICOLE, a French banking

corporation, Plaintiff-Appellee, Cross-Appellant, v. CBI INDUSTRIES, INCORPORATED, a Delaware corporation,

Defendant-Appellant, Cross-Appellee.

Nos. 95-2814, 95-2708.

United States Court of Appeals, Seventh Circuit.

Argued Feb. 8, 1996.

Decided July 24, 1996.

Rehearing and Suggestion for Rehearing

En Banc Denied

Aug. 20, 1996. ^*

Michael P. O'Brien, Thomas A. Doyle (argued), Michael L. Morkin, Baker & McKenzie, Chicago, IL, for Caisse Nationale de Credit Agricole in No. 95-2707.

Michael A. Pollard, Michael P. O'Brien, Thomas A Doyle (argued), Michael L. Morkin, Baker & McKenzie, Chicago, IL, for Caisse Nationale de Credit Agricole in No. 95-2814.

Julie A. Harms, Hinshaw & Culbertson, Chicago, IL, Robert V. Shannon (argued), Carla M. Rogers, Bell, Boyd & lloyd, Chicago, IL, for CBI Industries, Inc. in No. 95-2708.

Julie A. Harms, Hinshaw & Culbertson, Chicago, IL, Francis J. Higgins, Paul M. Bauch, Robert V. Shannon (argued), Carla M. Rogers, Bell, Boyd & Lloyd, Chicago, IL, for CBI Industries, Inc. in No. 95-2814.

Before ESCHBACH, FLAUM, and MANION, Circuit Judges.

MANION, Circuit Judge.

Interest rate "swaps" are agreements to exchange fixed-rate and floating-rate interest obligations. Typically, each party agrees to make interest payments to the other calculated by reference to an agreed amount, the "notional amount" in swap parlance. One party pays interest on the notional amount at a fixed rate; the other at a floating rate. When the agreement expires, the obligations are netted and the party owing the greater amount, if any, pays the excess. Swap agreements are used to manage interest rate risk or to speculate on interest rate movements. ¹ This case involves a dispute over the deadline to exercise an option (a "swaption") to bring a swap agreement into effect.

I.

Caisse Nationale de Credit Agricole ("Credit") is a French bank with its principal place of business in Paris. Chameleon Finance Company, B.V. ("Chameleon") is a Dutch subsidiary of CBI Industries, Inc. ("CBI"), a Delaware corporation. The district court found that both Chameleon and CBI have their principal places of business in Oak Brook, Illinois. On February 18, 1991, Credit and Chameleon entered into a swap agreement. Effective immediately, the parties agreed to exchange floating and fixed-rate interest obligations calculated on the basis of a notional amount of $35 million (Canadian) for the next three years, ending on January 16, 1994. That same day, Credit also purchased from Chameleon an option giving it the right to enter a second swap agreement to begin on January 16, 1994, the date the first would expire, and end on January 16, 1996. The deadline for exercising the option was January 16, 1994.

These agreements--the two swaps and the option to bring the second swap into effect--were initially struck over the telephone and then confirmed in two separate documents. The first contained the details of the 1991-94 swap. The second, sent from Credit's offices in New York City to Chameleon's offices in Oak Brook, Illinois, spelled out the particular terms of the 1994-96 swap and stipulated that the deadline for exercising the option that would bring it into effect was "5:00 p.m. EST up to and including January 16, 1994." In a letter to Credit dated March 12, 1991, CBI guaranteed Chameleon's obligations.

The January 16, 1994 deadline for the option fell on a Sunday, and the next day was a federal bank holiday commemorating the birthday of Dr. Martin Luther King, Jr. On Tuesday, January 18, 1994, Credit's New York office telephoned Chameleon in Oak Brook, Illinois and attempted to exercise the option. Chameleon balked, telling Credit the option had expired on January 16 and that therefore it would not honor the terms of the 1994-96 swap. CBI confirmed its position the next day, January 19, 1994, in a letter to Credit.

On February 7, 1994, Credit sued Chameleon and CBI in federal district court alleging anticipatory breach of the option contract and seeking appropriate damages. Jurisdiction was predicated on diversity of citizenship and an estimated amount in controversy in excess of $3 million. See 28 U.S.C. § 1332(a)(2). Over Credit's objection, CBI and Chameleon were permitted to move immediately for summary judgment without answering the complaint. They assured the district court that the "only" issue before the court was "an extremely simple one": "[W]hether or not [Credit] exercised the option in a timely fashion." Hence, "no discovery [would be] necessary." In their statement of undisputed facts, CBI and Chameleon specified that New York law governed both the swap and option agreements. After deposing one of defendants' employees, Credit filed a cross-motion for summary judgment on all counts.

On June 14, 1994, the district court granted summary judgment to Credit and denied defendants' motion. The district court held that section 25 of New York's General Construction Law ² extended the option deadline to January 18, 1994 from the original date of January 16 because the original day was a Sunday and the next a public holiday. Hence, the court concluded that on January 18, 1994 Credit timely exercised the option. The record is unclear, but apparently at this time the court also invited the parties to propose a method for calculating damages.

Defendants moved to certify the matter for interlocutory appeal pursuant to 28 U.S.C. § 1292(b). On July 22, 1994, the district court denied the motion and ordered defendants to submit a suggestion for the calculation of damages by August 26, 1994. That same day (July 22), Credit submitted a detailed estimate of damages. Instead of proposing its own damages calculation as instructed, defendants filed a brief arguing that Credit was not entitled to damages because, among other reasons, it had not given defendants notice of their failure to perform as required by the swap agreement. The court disagreed and on November 3, 1994 held that Credit was entitled to damages, though it disagreed with Credit's estimate. The court interpreted the swap agreement's notice provision as dictating that the date of suit (February 7, 1994) be used to calculate damages instead of, as Credit had argued, the date of repudiation (January 18, 1994). The court ordered the parties, and specifically Credit, to submit detailed estimates of damages consistent with its ruling. As directed, Credit filed new damages estimates. Defendants did not directly contest these figures, stating simply that "Defendants demur."

The court ruled by minute entry on the amount of damages, but before the entry was processed defendants, armed with new counsel, contested the court's subject matter (diversity) jurisdiction. They also claimed material evidence had not been presented and informed the court that on that basis they intended to file a motion for reconsideration. The court agreed to address the jurisdictional issue but asked counsel to delay the motion for reconsideration until after the question of jurisdiction was resolved.

After additional briefing, the district court found that because Chameleon was incorporated in the Netherlands, it was an alien for purposes of diversity jurisdiction regardless of the location of its principal place of business (Oak Brook, Illinois). This defeated diversity jurisdiction under 28 U.S.C. §§ 1332(a)(2) & (c)(1) because Chameleon, an alien, was impermissibly opposite Credit, another alien. However, the court agreed with both parties that the suit could proceed without Chameleon and so dismissed Chameleon without prejudice, curing the jurisdictional problem. The court held the dismissal did not invalidate or impair the award of summary judgment as to CBI's liability under the guarantee, reasoning that with the dismissal of Chameleon, the case against CBI had to be treated as within its diversity jurisdiction from the outset. The court thus reaffirmed its previous summary judgment ruling.

CBI then filed its motion for reconsideration alleging "manifest error of both law and fact" in the court's summary judgment ruling. The court denied the motion, holding that the additional factual information and legal arguments should have been put forth during summary judgment. On June 22, 1995, the district court denied CBI's belated motion for leave to amend its answer, which it had never filed, and entered final judgment for Credit in the amount of $3,307,036.09. CBI's motion to amend the judgment was also denied. CBI and Credit appeal.

II.

On appeal CBI challenges the denial of its motion for reconsideration and the granting of summary judgment. Credit contests the district court's calculation of damages. We address each of these matters in turn.

A.

After the district court resolved the jurisdictional issue and amended its order granting summary judgment, CBI filed a motion for reconsideration of the summary judgment order. CBI claimed that evidence material to the cross-motions for summary judgment had not been before the district court. Specifically, the motion for reconsideration raised three supposedly new facts: (1) that February 18, 1991, the date on which Credit and Chameleon traded the 1991 swap and formulated the option, was a holiday in New York (Washington's birthday) and Illinois (Presidents' day) but a regular business day in Toronto; (2) that the 1991 swap confirmation specified that Toronto business days governed the 1991 swap; and (3) that the documents Credit transmitted to CBI to confirm the option mistakenly omitted an addendum issued by the International Swap Dealers Association (ISDA), now known as the International Swaps and Derivatives Association. The district court denied the motion, noting that "CBI has not explained its reasons for failing to use [this] factual information ... in the months-old summary judgment phase of the case" despite that it was "clearly in existence when the parties...