Lehman Bros. Commercial v. Minmetals Intern.
| Citation | 179 F.Supp.2d 118 |
| Decision Date | 10 August 2000 |
| Docket Number | No. 94 Civ. 8301(JFK).,94 Civ. 8301(JFK). |
| Parties | LEHMAN BROTHERS COMMERCIAL CORPORATION and Lehman Brothers Special Financing Inc., Plaintiffs, v. MINMETALS INTERNATIONAL NON-FERROUS METALS TRADING COMPANY and China National Metals and Minerals Import and Export Company, Defendants. Minmetals International Non-Ferrous Metals Trading Company, Counterclaim Plaintiff, v. Lehman Brothers Inc., Lehman Brothers Asia Limited, Lehman Brothers Securities Asia Limited and Lehman Brothers Capital Co. (H.K.) Limited, Additional Counterclaim Defendants. |
| Court | U.S. District Court — Southern District of New York |
Cadwalader, Wickersham & Taft, Jonathan D. Polkes, of counsel, New York City, for Plaintiffs and Additional Counterclaim Defendants.
Kaye Scholer Fierman Hays & Handler, Aaron Rubinstein, of counsel, New York City, for Defendants and Additional Counterclaim Plaintiff.
FILE UNDER SEAL
Before the Court are cross-motions for summary judgment pursuant to Fed. R.Civ.P. 56. Defendants Minmetals International Non-Ferrous Metals Trading Company ("Non-Ferrous") and China National Metals & Minerals Import & Export Corporation ("Minmetals") move for summary judgment dismissing the Amended Complaint in this action, and Non-Ferrous moves to have judgment granted in favor of its Eighth Counterclaim. Plaintiffs Lehman Brothers Commercial Corporation ("LBCC") and Lehman Brothers Special Financing, Inc. ("LBSF") move for the following: (1) summary judgment on Counts One, Two, Four, and Five of the Amended Complaint; and (2) summary judgment on the affirmative defenses asserted by Defendants, except for the affirmative defense claiming failure to mitigate damages. Counterclaim Defendants Lehman Brothers, Inc. ("Lehman"),1 LBCC, LBSF, Lehman Brothers Asia Limited, Lehman Brothers Securities Asia Limited, and Lehman Brothers Capital Co. (H.K.) Limited also move for summary judgment on the counterclaims asserted by Non-Ferrous.
For the reasons that follow in this Opinion and Order, the Defendants' motion is denied. The motions by the Plaintiffs and the Counterclaim Defendants are granted in part and denied in part. The Court reserves decision on aspects of both sides' motions, as discussed in this Opinion and Order.
From 1992 to 1994, Lehman subsidiaries were involved in a foreign-exchange ("FX") and swap-trading relationship with Hu Xiangdong ("Hu"), an employee of Non-Ferrous. Non-Ferrous was itself a subsidiary of Minmetals. This case for contract damages, tort damages, and declaratory relief stems from the demise of that relationship.
Lehman is a global investment bank that offers a wide range of financial services. Lehman is headquartered in New York and maintains over thirty-five offices worldwide. LBCC is a booking vehicle for Lehman that books transactions in the foreign exchange markets. See Rubinstein Aff. in Supp. of Defendants' Mot. for Summ. J., Ex. 9, at 252, 418-19;2 R1. Ex. 19, at 243, Ex. 3, at 16, 18-19. LBSF is a booking vehicle for Lehman that books interest-rate and other forms of swap transactions. See R1. Ex. 9 at 252, 407-08, Ex. 3 at 16, 18-19. Neither LBCC nor LBSF have any employees, offices, or telephones of their own. They both are Delaware corporations. As evidenced by the facts of this case, both LBCC and LBSF, at least some of the time, serve as principals in transactions with counterparties.3
Minmetals is the parent corporation of the Minmetals Group, an international trading conglomerate that conducts business throughout the world and trades in more than 100 countries and regions. See Pl. Ex. 1. Minmetals is headquartered in Beijing in the People's Republic of China ("China"), is owned by the State, and reports directly to China's Ministry of Foreign Trade and Economic Cooperation. Id. Non-Ferrous is a wholly-owned subsidiary of Minmetals and is located in the same building as Minmetals. See P1. Exs. 2, 15.
Non-Ferrous initially opened an account with a Lehman affiliate — Lehman Brothers Commodities Limited ("LBCL") — sometime before the Fall of 1992 for trading on the London Metals Exchange ("LME"). After opening that account, Non-Ferrous sent LBCL communications identifying the Non-Ferrous employees that were authorized to place LME transactions through LBCL on Non-Ferrous' behalf. See R2. Ex. 15, at LM 3271, NF 1703, LM 32. Hu, an employee of Non-Ferrous, was not listed among those with authorization and had no role in opening the LME account.
In the Fall of 1992, Lehman personnel traveled to China as part of an active effort to solicit Chinese FX business. See R1. Ex. 13, at 174-77. During that trip, Lehman employees Timothy Potter, Jeremy Hodges, and May Tse met with Hu. Potter, an LBCC salesperson, went to Beijing to meet with Hu on the recommendation of a long-time customer. See P1. Ex. 14, at 1354. Potter's customer had indicated that Hu wanted to establish an FX trading relationship with Lehman, and Potter made the trip in hopes of establishing such a relationship. Id. at 1354-55.
During the meeting, Hu presented his business card to Potter. The card read, at top, "China National Metals & Minerals Imp. & Exp. Corp." See P1. Ex. 15. Directly under that heading, the card read, "International Non-Ferrous Metals Trading Co." Id. The card then identified Hu as "General Manager — Non-Ferrous Metals." Id.
Before that meeting in Beijing, Potter had met with James Bedford, an LBCL salesperson, to discuss LBCL's LME relationship with Non-Ferrous. See P1. Ex. 14, at 1355. Potter learned from Bedford that Non-Ferrous was an established LME customer in good standing with LBCL. Id. at 1355-57. Although Lehman claims in its papers that Bedford confirmed at that time that Hu was an authorized trader for Non-Ferrous, neither Potter nor Bedford make such a claim. Bedford does not recall when Hu became authorized to trade for Non-Ferrous on the LME, and Potter has not stated that Bedford told him anything about Hu. See R2. Ex. 10 at 246-49; P1. Ex. 14, at 1355-56.
At the Fall 1992 meeting, Potter reviewed Bedford's file on the Minmetals companies and noticed a Letter of Undertaking signed by both Minmetals and Non-Ferrous. The Letter of Undertaking indicated that the LME account was opened to allow Non-Ferrous to trade on the LME, and that Minmetals acted as Guarantor for any liabilities incurred by Non-Ferrous. See P1. Ex. 17, at LM 000502. The Letter of Undertaking stated that LBCL was to place at Non-Ferrous' disposal "facilities in respect of [Non-Ferrous'] operations on all or any of the world's commodity, bullion, metal, securities, foreign exchange, index, financial instruments and options markets and future markets of any sort." Id.
After Hu's Beijing meeting with the Lehman personnel, Hu agreed to begin FX trading with LBCC on Non-Ferrous' behalf. This FX relationship in no way involved the LME account. Hu maintains that he agreed to commence FX trading because Lehman had been calling him regularly with market and trading advice and to recommend FX transactions to him. Hu claims that in making his decision to begin FX trading, he relied on Lehman's representations that it would make specific recommendations to him and would execute his transactions at a favorable price. See Hu Aff. ¶ 18. Hu maintains that he did not understand that LBCC was to be a principal in these transactions; instead, he believed that LBCC was his agent and advisor, and that Potter and he were "a team." Id. ¶ 29.
The opening of Non-Ferrous' FX trading account with LBCC did not proceed smoothly. On November 26, 1992, Hu executed a Commodity Terms and Conditions Agreement and Supplement. See P1. Ex. 19. Hu executed the agreement in China and faxed a copy to Potter in London. Although the fax cover sheet was written on Minmetals letterhead, it was clearly sent by Non-Ferrous, even though it was faxed after normal business hours from the offices of a company unrelated to either Minmetals or Non-Ferrous. See id.; R2. Ex. 23, at 728-31.
The FX account was opened in Minmetals' name: "China National Metals and Minerals Imp + Exp Corp." See P1. Ex. 19. Potter claims that he used Minmetals' name in the agreement because Hu had instructed him to do so. See R2. Ex. 23, at 727-29. Hu, on the other hand, claims that he had intended to open the account in Non-Ferrous' name. See Hu Aff. ¶ 26. Hu states that Potter told him that he would fill out the account title for him, and Hu assumed that Potter would use Non-Ferrous' name. Hu says he signed the agreement without realizing that Potter had used Minmetals' name on that agreement. Id. ¶¶ 26-27.
Hu claims that within two weeks after signing the agreement and after the initial FX transaction was placed,4 he realized that Potter had used Minmetals' name rather than Non-Ferrous' name. Hu says that when he told Potter of the mistake, Potter assured him that he would quickly correct it. Id. ¶ 27. Potter states that Hu directed him to transfer the account from Minmetals to Non-Ferrous. See P1. Ex. 21.
In any event, on December 8, 1992, Hu executed an identical Commodity Terms and Conditions Agreement and Supplement in Non-Ferrous' name. See P1. Ex. 22. Hu executed the agreement in China and faxed it on Non-Ferrous letterhead from Non-Ferrous' office to Potter in London. The agreement designated New York law as its governing law and provided for Non-Ferrous' payment of collateral — known as margin — under certain circumstances. The agreement stated that Lehman would have the right to liquidate its transactions with Non-Ferrous in the event that Non-Ferrous did not meet its margin obligations. See P1. Ex. 24. It required that Non-Ferrous pay any deficiencies remaining after such a liquidation. Id.
At the same time that Hu executed the...
To continue reading
Request your trial
-
Indian Harbor Ins. Co. v. City of San Diego
...or transaction giving rise to the litigation.” Id. at 308, 101 S.Ct. 633;see also Lehman Bros. Commercial Corp. v. Minmetals Int'l Non–Ferrous Metals Trading Co., 179 F.Supp.2d 118, 137 (S.D.N.Y.2000). Ultimately, the question is whether the state has “a significant contact or significant a......
-
Breatie and Osborn Llp v. Patriot Scientific Corp.
...Radioactive, J.V. v. Manson, 153 F.Supp.2d 462, 469-70 (S.D.N.Y.2001) (citing Lehman Bros. Commercial Corp. v. Minmetals Int'l Non-Ferrous Metals Trading Co., 179 F.Supp.2d 118, 136 (S.D.N.Y.2000) (Keenan, J.)); see also Hartford Fire Ins. Co. v. Orient Overseas Containers Lines (UK) Ltd., ......
-
Petroleos De Venez. S.A. v. Mufg Union Bank, N.A.
...Morgan Guar. Tr. Co. of N.Y. , 269 F. Supp. 2d 424, 438 (S.D.N.Y. 2003) ; see also Lehman Bros. Commercial Corp. v. Minmetals Int'l Non-Ferrous Metals Trading Co. , 179 F. Supp. 2d 118, 138 (S.D.N.Y. 2000) ("A contract that is illegal in its place of performance is unenforceable in New York......
-
Pfizer, Inc. v. Stryker Corp.
...would uphold that designation. See N.Y. GEN. OBLIG. LAW § 5-1401 (McKinney 2001); Lehman Bros. Commercial Corp. v. Minmetals Int'l Non-Ferrous Metals Trading Co. 179 F.Supp.2d 118, 138 (S.D.N.Y.2000). 64. Int'l Multifoods Corp. v. Commercial Union Ins. Co., 309 F.3d 76, 83 (2d Cir.2002); Ka......
-
Will Anti-Reliance Provisions Preclude Extra-Contractual Fraud Claims? Answers Differ In Delaware, New York, And California
...$250,000 and excluding certain types of contracts); Lehman Bros. Commercial Corp. v. Minmetals Int'l Non-Ferrous Metals Trading Co., 179 F. Supp. 2d 118, 136 (S.D.N.Y. See Nedlloyd Lines B.V. v. Superior Court, 3 Cal. 4th 459, 466-67 (1992). See, e.g., Abat v. Chase Bank USA, N.A., 738 F. S......
-
Choice-of-law Agreements in International Contracts
...York, 62 St. John's L. Rev. 243 (1988). See also Lehman Brothers Commercial Corp. v. Minmetals Int'l Non-Ferrous Metals Trading Co., 179 F.Supp.2d 118, 138 (S.D.N.Y. 2000). As a consequence, the validity of choice-of-law agreements selecting non-New York law is, under New York law, subject ......
-
ILLIBERAL LAW IN AMERICAN COURTS.
...2007) (interpreting Chinese marriage law). (61) See Lehman Bros. Commercial Corp. v. Minmetals Int'l Non-Ferrous Metals Trading Co., 179 F. Supp. 2d 118, 139-42 (S.D.N.Y. 2000) (determining that certain transactions violated multiple laws governing foreign exchange in (62) See Guangzhou Con......