OppenheimerFunds, Inc. v. TD Bank, N.A.
| Decision Date | 05 February 2014 |
| Docket Number | Motion Seq. No. 001,Motion Seq. No. 003,Index No. 653299/2011,Motion Seq. No. 002 |
| Citation | 2014 NY Slip Op 30379 |
| Court | New York Supreme Court |
| Parties | OPPENHEIMERFUNDS, INC. AND OPPENHEIMER MULTI-STATE MUNICIPAL TRUST ON BEHALF OF ITS SERIES OPPENHEIMER PENNSYLVANIA MUNICIPAL FUND, AND OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS, Plaintiffs, v. TD BANK, N.A., WESTLB AG (NEW YORK BRANCH), FARM CREDIT BANK OF TEXAS, FIRST UNITED BANK & TRUST, NGP CAPITAL RESOURCES COMPANY, AND PLAINFIELD GAMING II INC., Defendants. |
This matter comes before the Court on the motions to dismiss filed by Defendants TD Bank, N.A, ("TD"), WestLB AG, New York Branch ("WestLB"), Farm Credit Bank of Texas ("Farm Credit"), NPG Capital Resources Company ("NPG"), and Plainfield Gaming II Inc. ("Plainfield").
In motion sequence no. 001, defendant TD moves to dismiss the complaint with prejudice on the grounds that plaintiffs; (1) lack standing to assert contract claims, (2) fail to include necessary parties, and (3)fail to state a cause of action. In motion sequence no. 002, defendant WestLB moves, pursuant to CPLR 3211, for an order dismissing the complaint on the same grounds as those set forth in TD's motion, as well as the additional ground that plaintiffs' claims are nonjusticiable. WestLB also moves to dismiss the causeof action for fraud asserted as against it. In motion sequence no. 003, defendant First United moves, pursuant to CPLR 3211, for an order dismissing the complaint with prejudice, and all causes of action asserted as against it, for the same reasons as set forth in the prior motions. These three motions are consolidated for disposition.
By separate affirmations dated March 22, 2013, defendants Plainfield and NPG join in the motions to dismiss. By affirmation dated March 25, 2013, defendant Farm Credit also joins in the motions to dismiss.
For the reasons set forth below, the motions to dismiss are granted, and the complaint is dismissed as against the moving parties.
This action arises out of the financing of an ethanol plant built in Clearfield, Pennsylvania by Bionol Clearfield, LLC ("Bionol"). Bionol is now liquidating in the United States Bankruptcy Court for the District of Delaware under Chapter 7 of the Bankruptcy Code. A Senior Intercreditor Agreement, as well as a Senior Credit Agreement entered into in connection with that financing, established various tranches of debt to be repaid by Bionol in a specified order of priority. Plaintiffs are owners of $65 million of bonds (the "Bonds"), which formed one tranche of debt under the agreements. Plaintiffs contend that they agreed to acquire the Bonds on the condition that, in the eventof a default, the Bonds would share pari passu with defendants - the senior lenders - in the collateral security. Plaintiffs further contend that they purchased the Bonds after reviewing a draft of the Senior Intercreditor Agreement. However, the final version of the agreement states that defendants' claims under the secured credit facility would be senior to plaintiffs' claims under the Bonds following a default (which subsequently occurred).
Plaintiffs now seek to reform and rescind the Senior Intercreditor Agreement. The complaint asserts only one count against most of the defendants - a "cause of action for equitable relief." This single count includes assertions of equitable reformation, equitable rescission, unilateral mistake, equitable estoppel, unjust enrichment, and equitable subordination. The complaint also contains a cause of action against defendant WestLB for fraud.
On February 6, 2008, Bionol, as borrower, entered in the Senior Credit Agreement with various lenders, including defendants TD Banknorth N.A. (TD's predecessor), WestLB (now known as Portigon AG, New York Branch), Farm Credit, First United, NGP and Plainfield. See Affirmation of Noah Stern ("Stern Affirm.") Ex. A (Senior In addition, both the Senior Intercreditor Agreement and the Senior Credit Agreement state that there are no third party beneficiaries to either agreement. The Senior Intercreditor Agreement provides that:
Nothing in this Agreement shall give to ... any ... Person (other than the parties hereto and their successor and permitted assigns) any benefit or any legal or equitable right or remedy under this Agreement.
(Senior Intercreditor Agreement, § 5.04.) The Senior Credit Agreement similarly provides that:
nothing in this Agreement or any other Financing Document, express or implied, shall give to any Person, other than the parties hereto and thereto, and each of the successors and permitted assigns under this Agreement or any other Financing Document, any benefit or any legal or equitable right or remedy under this Agreement.
(Senior Credit Agreement, § 10.04.)
In addition, neither agreement states that Wells Fargo - which signed each of these documents as a "Lender" - was acting on behalf of plaintiffs or any other Bond owner.
The Senior Intercreditor Agreement contains a "waterfall" provision that sets forth a designated order of priority and places the Lenders' priority in the collateral ahead of that of the Bonds. As described in the Senior Intercreditor Agreement, the loans to Bionol were divided into tranches, including (1) "Tranche A Loans," (2) "Tranche B Loans," (3) "Tranche C Loans," (4) a tranche for "Working Capital" loans, and, (5) "Tranche TEX Loans." (Compl. ¶ 20: Senior Intercreditor Agreement at 1, 3.) "TrancheTEX Loans" refers to those Bonds for which Wells Fargo (and now its successor U.S. Bank) is the only Lender. Id. Ex. A.
As executed, Section 3.04(f)(iv) of the Senior Intercreditor Agreement provides that, in the event of a liquidation:
principal shall be paid in the following order of priority ... first, to the Tranche A Lenders; second, to the Tranche B Lenders; third, to the Working Capital Lenders; and fourth, the Bond Trustee in respect of the Tranche TEX Loans.
(Senior Intercreditor Agreement, ¶ 3.04(f)(iv).) The agreement provides that the Tranche C Lenders are to be paid after the Tranche TEX Loans. Id. §§ 3.04(f)(v) & (vi). Plaintiffs refer in their complaint to those defendants - TD, WestLB, Farm Credit and First United - who will be paid ahead of the Tranche TEX as the "Senior Lending Group" (Compl. ¶ 9.)
During the nearly three years after the Senior Intercreditor Agreement was executed, neither plaintiffs nor Wells Fargo, the Bond Trustee, complained that the agreement was wrong or failed to reflect a meeting of the minds. As plaintiffs allege in the complaint, when Bionol's liquidity became tenuous towards the end of 2010, plaintiffs were contacted by counsel for Wells Fargo, who "stated that OppenheimerFunds should be vigilant in monitoring the performance of the Plant, because OppenheimerFunds likely would receive nothing from a liquidation as a result ofits junior status with respect to the repayment of principal in such a situation under Section 3.04(f)(iv) of the Senior Intercreditor Agreement." Id. ¶¶ 31-32.
Plaintiffs allege that they are the sole holders of the Bonds, and that the Indenture provides them with certain rights to enforce Wells Fargo's rights under the Indenture. Id. ¶¶ 35-36. Unlike the Senior Intercreditor Agreement and the Senior Credit Agreement, the Indenture expressly provides that the Bond "Owners" are third-party beneficiaries of the Indenture:
Except as herein otherwise specifically provided, nothing in this Indenture expressed or implied is intended or shall be construed to confer upon any person, firm, corporation or entity other than . . . the Trustee and the Owners of the Bonds any right, remedy or claim under or by reason of this Indenture, this Indenture being intended to be for the sole and exclusive benefit of the . . . Trustee and the Owners of the Bonds.
However, while the Indenture provides certain opportunities for the Owners to step into the shoes of the Bond Trustee to enforce specified rights, see id., § 8.05, it also states that any such right is limited by the provisions of the Senior Intercreditor Agreement. See id. § 8.12 (). This includes the limitation set forth in the Senior Intercreditor Agreement, which precludes the existence of any third-party beneficiaries.
The Indenture also states that a fiduciary relationship exists between Oppenheimer Funds, as "Owner" of the bonds, and Wells Fargo, as bond Trustee. See id. § 12,02. In contrast, no fiduciary relationship is created between the parties to the Senior Credit Agreement or the Senior Intercreditor Agreement. See, e.g., Senior Credit Agreement § 9.03(a)(i) (), Moreover, the Senior Intercreditor Agreement provides that no Lender has relied on information provided by any other Lender:
Notwithstanding any other provision of this Agreement to the contrary, it is hereby acknowledged and agreed that no Lender has relied, or shall rely, on any other Lender to review or evaluate the condition of a Borrower, any Affiliate of any thereof, the Project or any Person . . . . Each Lender has decided or determined to enter into the Financing Documents to which it is a party on the basis of its own independent judgment, without reliance or information provided by or expected from, or views expressed by, any other Lender.
(Senior Intercreditor Agreement, § 4.01; see also Senior Credit Agreement, § 9.08 (similar "no reliance" provision).
The gravamen of the complaint is that the...
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