Sns Bank, N.V. v. Citibank, N.A.

• Decision Date: 13 May 2004
• Docket Number: 3629.
• Citation: 2004 NY Slip Op 03911,777 N.Y.S.2d 62,7 A.D.3d 352
• Parties: SNS BANK, N.V., Appellant, v. CITIBANK, N.A., ET AL., Respondents.
• Court: New York Supreme Court — Appellate Division

7 A.D.3d 352

777 N.Y.S.2d 62

2004 NY Slip Op 03911

SNS BANK, N.V., Appellant, v. CITIBANK, N.A., ET AL., Respondents.

3629.

Appellate Division of the Supreme Court of the State of New York, First Department.

May 13, 2004.

Order, Supreme Court, New York County (Helen E. Freedman, J.), entered on or about August 6, 2003, which dismissed the amended complaint, unanimously affirmed, with costs.

Personal jurisdiction was never acquired over the directors of defendant Captiva Finance, a Cayman Islands corporation (see CPLR 302 [a] [1]). These directors reside variously in the Caymans, Bermuda, England and Luxembourg, and all except two of them submitted affidavits stating that they conducted their directorial duties outside the State of New York. As for the two directors who attended a Captiva board meeting in New York in December 2000, there was no "substantial nexus between the business transacted [here] and the cause of action" sued upon (Richbell Info. Servs. v Jupiter Partners, 309 AD2d 288, 308 [2003]), inasmuch as the complaint is directed at omissions from a 1996 offering memorandum and the replacement of the financial manager in 1999.

The IAS court properly exercised its discretion in denying plaintiff's request for jurisdictional discovery. Plaintiff's affidavit in opposition to defendants' motion to dismiss did not request such discovery (see CPLR 3211 [d]), and plaintiff failed to offer "some tangible evidence which would constitute a `sufficient start' in showing that jurisdiction could exist, thereby demonstrating that its assertion that a jurisdictional predicate exists is not frivolous" (Mandel v Busch Entertainment Corp., 215 AD2d 455, 455 [1995]). The fact that Captiva has submitted to the jurisdiction of the New York courts does not mean that its directors have done so (see e.g. Baran Computer Servs. v First Bank of Maury County, 143 AD2d 63, 64 [1988]).

Plaintiff claims that Captiva breached its fiduciary duty by permitting Citibank to become financial manager in the summer of 1999 and failing to properly monitor or fire Citibank thereafter. The first step in any choice-of-law analysis is to determine if there is actually a conflict between the laws of the competing jurisdictions (Matter of Allstate Ins. Co. [Stolarz — New Jersey Mfrs. Ins. Co.], 81 NY2d 219, 223 [1993]). If there is none, then the law of the forum state where the action is being tried should apply (Excess Ins. Co. v Factory Mut. Ins. Co., 2 AD3d 150, 151 [2003]). Under New York law, Captiva would not owe plaintiff a fiduciary duty because the relationship between them is one of debtor and note-holding creditor (see Fallon v Wall St. Clearing Co., 182 AD2d 245, 250 [1992]; Banco Espirito Santo de Investimento v Citibank, 2003 WL 23018888, *17, 2003 US Dist LEXIS 23062, *50 [SD NY, Dec. 22, 2003]), which is purely contractual (see Marine Midland Bank v Yoruk, 242 AD2d 932 [1997]). Even under the law of the Caymans, where Captiva was incorporated, it is unrefuted that Captiva would owe no fiduciary duty to plaintiff.

Plaintiff's claim that Captiva breached the subscription agreement by failing to create and maintain a structure in which a financial manager independent of Citibank would serve, subject to the oversight of independent Captiva directors and an independent administrative agent and administrative committee, was properly dismissed. Plaintiff concedes that no specific provision of the subscription agreement or the offering memorandum (which the subscription agreement incorporates by reference) created such a duty. In light of the merger clause in the subscription agreement, the obligations plaintiff seeks to impose should not be added to the parties' contract (see e.g. Goldfeld v Mattoon Communications Corp., 99 AD2d 711, 712 [1984], appeal dismissed 62 NY2d 802 [1984]).

To be sure, a merger clause does not prevent a court from inferring a covenant of good faith and fair dealing (see Havel v Kelsey-Hayes Co., 83 AD2d 380, 384 [1981]). However, such an obligation can only be found where the implied term is consistent with other terms in the contract (see Murphy v American Home Prods. Corp., 58 NY2d 293, 304 [1983]). The offering memorandum specifically stated that Citibank was the administrative agent, that two of the three members of the administrative committee were Citibank employees (and the third was of counsel to a firm that provided a significant amount of legal services to Citibank), and that Captiva could fire the financial manager at any time. Hence, it would be contrary to the explicit terms of the parties' contract to infer an obligation on Captiva's part to guarantee an independent financial manager, administrative agent and administrative committee. Although it would not be contrary to the offering memorandum to infer an obligation that the Captiva directors be independent, such a promise is not "`so interwoven in the whole writing' of a contract as to be necessary for [the] effectuation of the purposes of the contract" (M/A-COM Sec. Corp. v Galesi, 904 F2d 134, 136 [2d Cir 1990]).

Counts IV and V (breach of the administration agreement and the financial management agreement by Citibank) were properly dismissed because plaintiff is not an intended third-party beneficiary of either contract (see e.g. State of California Pub. Employees' Retirement Sys. v Shearman & Sterling, 95 NY2d 427, 434-435 [2000]; Banco Espirito Santo, 2003 WL 23018888, at *10, 2003 US Dist LEXIS 23062, at *29). Furthermore, plaintiff's claim that Citibank breached the financial management agreement by making improper, imprudent, and unsuitable investments would be barred by that contract's exculpatory clause (see e.g. Retty Fin. v Morgan Stanley Dean Witter & Co., 293 AD2d 341 [2002]). Even on a motion to dismiss, a court need not accept as true conclusory allegations that a defendant was grossly negligent or acted willfully, in bad faith or with reckless disregard of its duties (see e.g. Perl v Smith Barney Inc., 230 AD2d 664, 665 [1996], lv denied 89 NY2d 803 [1996]).

Plaintiff's claims for breach of fiduciary duty against Citibank and the Citibank...