In re Bank of N.Y. Mellon Corp. Forex Transactions Litig.
| Decision Date | 09 July 2014 |
| Docket Number | Master Docket No. 12 MD 2335LAK. |
| Citation | 42 F.Supp.3d 520 |
| Parties | In re BANK OF NEW YORK MELLON CORP. FOREX TRANSACTIONS LITIGATION. |
| Court | U.S. District Court — Southern District of New York |
Joseph H. Meltzer, Sharan Nirmul, Shannon O. Braden, Sekou Campbell, Kessler Topaz Meltzer & Check, LLP, Elizabeth J. Cabraser, Steven E. Fineman, Daniel P. Chiplock, Daniel E. Seltz, Michael J. Miarmi, Lieff Cabraser Heimann & Bernstein, LLP, for Plaintiffs.
Brian K. Murphy, Murray Murphy Moul & Basil, LLP, for Plaintiff Ohio Police & Fire Pension Fund.
Michael P. Thornton, Michael A. Lesser, Thornton & Naumes, LLP, Michael P. Lehmann, Christopher L. Lebsock, Hausfeld, LLP, Gregory S. Hach, Michael A. Rose, Frank R. Schirripa, Hach Rose Schirripa & Cheverie, LLP, for Plaintiff International Union of Operating Engineers.
Bradley E. Beckworth, Brad Seidel, Jeffrey J. Angelovich, Nix Patterson & Roach, LLP, for Plaintiff Southeastern Pennsylvania Transportation Authority.
Reid M. Figel, Rebecca A. Beynon, David L. Schwarz, Derek T. Ho, Gregory G. Rapawy, Andrew C. Shen, Kellog Huber Hansen Todd Evans & Figel, PLLC, for Defendants.
The plaintiffs in these three actions all were or are customers of the Bank of New York Mellon (“BNYM”)1 that contracted with BNYM to execute certain foreign exchange transactions on their behalf. They now allege that BNYM is liable for breaches of fiduciary duties, contract, and the implied covenant of good faith and fair dealing, conversion, unjust enrichment, and certain violations of state business law for assigning fictitious foreign currency exchange rates to the plaintiffs' purchases and sales of foreign securities in violation of contractual guarantees. The Department of Justice and several other groups of private plaintiffs also have sued BNYM for alleged damages stemming from its foreign exchange practices. In response, BNYM counterclaimed for indemnification from the Southeastern Pennsylvania Transportation Authority (“SEPTA”), the International Union of Operating Engineers (“IUOE Local 39”) and its Trustees,2 and, conditionally, from the unnamed putative class members in all three cases.
The plaintiffs now move to dismiss those counterclaims, arguing that (1) they are untimely; (2) the counterclaims against the IUOE Local 39 and its Trustees were waived; (3) they fail to state a plausible claim; and (4) conditional counterclaims against absent class members are improper.
SEPTA filed its original complaint against BNYM in March 2011, IUOE Local 39 in July 2011, and Ohio Police and Fire in April 2012. BNYM answered IUOE Local 39's amended complaint, but never answered in the other two actions. After the cases were transferred to this district as part of the multi-district litigation against BNYM, the Court granted the plaintiffs leave to file a Master Customer Class Complaint.3 The Court subsequently entered a scheduling order requiring that any answers to complaints be filed by September 15, 2013.4 It was silent on the topic of counterclaims.
On September 15, 2013 BNYM answered the Master Customer Class Complaint and included its counterclaims for indemnification. It asserts that the counterclaims arise under the Master Trust Agreement (“MTA”), pursuant to which it provided custody services to SEPTA, and the Global Custody Agreement (“GCA”), pursuant to which it provided custody services to IUOE Local 39. BNYM is seeking, at minimum, indemnification for costs and attorneys fees incurred in defending against these actions and, at broadest, indemnification also for costs, attorneys fees, and any liability assessed against it in the related actions, to the extent that those actions arise out of the MTA and GCA.
The MTA provides that SEPTA will compensate BNYM for, inter alia, expenses and “reasonable attorneys' fees, that may be incurred by, imposed upon, or asserted against [BNYM] by reason of any claim, regulatory proceeding, or litigation arising from any act done or omitted to be done by any individual or person with respect to the Participating Plans or Master Trust Fund, excepting only any and all cost and expense arising solely from [BNYM's] negligence, bad faith, or breach of fiduciary duty.”5
Similarly, the GCA provides that IUOE Local 39 “will be liable for and will indemnify and keep fully indemnified ... [BNYM] and its nominees and hold them harmless from and against, any and all Losses howsoever arising from or in connection with this Agreement or the performance of their duties hereunder (including disputes between the parties or enforcement of this Agreement), provided, however, that nothing contained herein shall require that [BNYM] or its nominees be indemnified for their respective fraud, negligence, or willful misconduct....”6
The parties agree, for the purposes of this motion, that Pennsylvania law controls the claim for indemnification against SEPTA under the MTA and California law controls the claim for indemnification against IUOE Local 39 under the GCA.
The plaintiffs argue that the counterclaims are not timely and that BNYM in effect is seeking to modify the scheduling order because the scheduling order did not address the time by which counterclaims must be filed.7
Rule 13(a) directs that “[a] pleading must state as a counterclaim any [compulsory counter] claim that—at the time of its service—the pleader has against an opposing party....” Rule 13(b) similarly permits the assertion of permissive counterclaims. BNYM therefore was permitted to file counterclaims as part of its first pleadings responsive to the complaints. Its first responsive pleading in the SEPTA and Ohio Police and Fire actions was its answer to the Master Customer Class Complaint, which was filed on September 15, 2013 pursuant to the scheduling order. That answer included the counterclaims at issue here. There is nothing in the scheduling order that suggests an intent to override Rule 13 to bar the filing of counterclaims. Silence in the scheduling order does not so imply.8
The plaintiffs argue also that BNYM has waived its counterclaims against IUOE Local 39 and its Trustees because (a) they are compulsory counterclaims and (b) BNYM did not raise them in its first responsive pleading, which was its answer to IUOE Local 39's amended complaint.9 BNYM cannot, the plaintiffs claim, file counterclaims along with a second or amended answer.
BNYM argues that it is entitled to file counterclaims with its amended answer for two reasons. First, BNYM was entitled to plead new counterclaims because the Master Customer Class Complaint expanded the scope of IUOE Local 39's claims against BNYM. Second, leave to amend in any case would be warranted under Rule 15(a)(2).
10 IUOE Local 39 asserts several claims against BNYM in the Master Customer Class Complaint that were not in its amended complaint. For example, it now alleges claims for unjust enrichment11 and conversion.12
The plaintiffs argue that these changes did not expand the scope of IUOE Local 39's claims because the Master Customer Class Complaint merely “aggregates the claims of the three actions ... thereby adding any causes of action that were asserted in the SEPTA Action and Ohio Action to the claims that the Local 39 Fund brought in California.”13 The plaintiffs suggest no reason why the fact that other plaintiffs already had brought certain claims that IUOE Local 39 now adopts as its own should change the analysis. The scope of IUOE Local 39's complaint against BNYM has changed, and BNYM thus was entitled to amend its answer to that plaintiff's complaint and to add new counterclaims. In any case, leave to amend would be granted.
The plaintiffs make several substantive arguments as to why BNYM's counterclaims must fail as a matter of law. None of them is persuasive.
First, they argue that BNYM is alleged to have caused the very loss for which it seeks indemnification by breaching its custodial agreements, including by acting, inter alia, negligently, fraudulently, in bad faith, or in breach of fiduciary duty and that BNYM therefore is not entitled to indemnification under the MTA or GCA. That BNYM is alleged to have committed certain acts is immaterial. Whether it actually did commit those acts, which it disputes, is not appropriate for determination on a motion to dismiss.
Second, the plaintiffs assert that under the controlling states' laws—California, in the case of the agreement with IUOE Local 39 and Pennsylvania in the case of the agreement with SEPTA—the indemnification provisions are not adequately explicit to allow for fee shifting between the parties to the contract. The Court disagrees.
Under California law, an award of attorneys' fees in an action between the parties to a contract is permissible as long as the contract explicitly so provides.14 The GCA is perfectly clear in providing for such an award. It states that IUOE Local 39 “will be liable for and will indemnify and keep fully indemnified ... [BNYM] and its nominees and hold them harmless from and against, any and all Losses howsoever arising from or in connection with this Agreement or the performance of their duties hereunder (including disputes between the parties or enforcement of this Agreement )....” The term “losses” is defined as “any and all claims, losses, liabilities, damages, costs, expenses and judgments (including reasonable attorneys' fees and expenses) sustained by either party hereto.”15 The indemnification provision explicitly includes attorneys'...
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