12‐0768‐cv Christine Falls Corporation et al v. U.S. Bank National Association et al
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
SUMMARY ORDER
Rulings by summary order do not have precedential effect. Citation to a summary order filed on or after January 1, 2007, is permitted and is governed by Federal Rule of Appellate Procedure 32.1 and this court’s Local Rule 32.1.1. When citing a summary order in a document filed with this court, a party must cite either the Federal Appendix or an electronic database (with the notation “summary order”). A party citing a summary order must serve a copy of it on any party not represented by counsel.
1 At a stated term of the United States Court of Appeals for the Second Circuit, held 2 at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New 3 York, on the 19th day of September, two thousand thirteen. 4 5 PRESENT: 6 7 JOHN M. WALKER, 8 DEBRA ANN LIVINGSTON, 9 DENNY CHIN, 10 11 Circuit Judges. 12 _______________________________________________ 13 14 CHRISTINE FALLS CORPORATION, TRAFALGAR POWER, INC. 15 16 Petitioners‐Appellants,
17 ‐v.‐ No. 12‐0768‐cv 18 19 U.S. BANK NATIONAL ASSOCIATION, FKA STATE STREET BANK & TRUST COMPANY OF 20 CONNECTICUT,
21 Respondents‐Appellees.
22 ALGONQUIN POWER CORPORATION, INCORPORATED, ALGONQUIN POWER INCOME FUND,
1 1 ALGONQUIN POWER FUND CANADA, INC.,
2 Third Party Defendants
3 STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, N.A.,
4 Defendant 5 _______________________________________________
6 DAVID M. CAPRIOTTI , 7 Harris Beach PLLC, Pittsford, NY, for Petitioners‐ 8 Appellants.
9 JILL M. O’TOOLE (Kathleen M. LaManna, Sheila A. 10 Huddleston, on the brief), Shipman & Goodwin LLP, 11 Hartford, CT, for Respondent‐Appellee. 12 13 UPON DUE CONSIDERATION, it is hereby ORDERED, ADJUDGED, and
14 DECREED that the judgment of the District Court is AFFIRMED.
15 Petitioners‐Appellants Christine Falls Corporation and Trafalgar Power
16 (“Trafalgar”) appeal from an Amended Judgment entered on May 15, 2012, which
17 incorporated a February 21, 2012 decision and order of the United States District
18 Court for the Northern District of New York (Hurd, J.) granting summary judgment
19 in favor of U.S. Bank National Association, FKA State Street Bank & Trust (“Bank”),
20 on Trafalgar’s breach of fiduciary duty, breach of contract, and accounting claims;
21 a September 17, 2009 summary order affirming the Magistrate Judge’s order striking
22 Trafalgar’s jury trial demand; and a February 10, 2009 order dismissing Trafalgar’s
23 tort claims.
2 1 The facts of this case are well known. The underlying events have been the
2 subject of several consolidated actions, litigation has spanned more than a decade,
3 and this is one of several appeals we have heard. We assume the parties’ familiarity
4 with the background of this case and the issues on appeal.
5 * * *
6 We review the district court’s dismissal of claims on a motion to dismiss de
7 novo, “accepting all factual allegations in the complaint as true, and drawing all
8 reasonable inferences in the plaintiff’s favor.” City of Pontiac Gen. Emps.’ Ret. Sys. v.
9 MBIA, Inc., 637 F.3d 169, 173 (2d Cir. 2011) (internal citations omitted). This Court
10 reviews the district court’s grant of summary judgment de novo and will affirm
11 where there are no genuine issues of material facts to be tried and where the facts
12 warrant entry of summary judgment in the moving party’s favor as a matter of law.
13 Velez v. Sanchez, 693 F.3d 308, 313‐14 (2d Cir. 2012).
14 1. Fiduciary Duty Claim
15 The district court granted the Bank summary judgment on Trafalgar’s breach
16 of fiduciary duty claim because the undisputed facts demonstrate that the Bank did
17 not owe Trafalgar a fiduciary duty. We conclude that this determination was correct
18 and that in the absence of a fiduciary relationship between Trafalgar and the Bank,
3 1 the district court correctly granted summary judgment as to this claim. See Biller
2 Assocs. v. Peterken, 849 A.2d 847, 851 (Conn. 2004).
3 Trafalgar recognizes that the Amended and Restated Collateral Trust
4 Indenture (“Indenture”) does not provide that the Bank owes Trafalgar fiduciary
5 duties. But as we have said before, “[u]nlike the ordinary trustee, who has historic
6 common‐law duties imposed beyond those in the trust agreement, an indenture
7 trustee[’s]...duties and obligations are exclusively defined by the terms of the
8 indenture agreement.” Meckel v. Cont’l Res. Co., 758 F.2d 811, 816 (2d Cir. 1985). In
9 this case, moreover, the Indenture itself expressly prohibits implied duties in
10 § 9.1(a)(i). See Indenture § 9.1(a)(i) (“[T]he Security Trustee undertakes to perform,
11 and shall perform, such duties and only such duties as are specifically set forth in
12 this Indenture, and no implied covenants or obligations shall be read into this
13 Indenture against the Security Trustee.”). Section 9.1(e) makes this provision
14 applicable to the entire Indenture.
15 Furthermore, even if we assume arguendo that implying fiduciary duties as to
16 the Bank is permissible pursuant to Connecticut law, the relationship of these
17 parties, based on undisputed record facts, does not give rise to fiduciary obligations.
18 Fiduciary duties are implied under Connecticut law when there is a “unique degree
4 1 of trust and confidence between the parties such that the defendants undertook to
2 act primarily for the benefit of the plaintiff.” Hi‐Ho Tower, Inc. v. Com‐Tronics, Inc.,
3 761 A.2d 1268, 1279‐80 (Conn. 2000) (internal quotation marks omitted).1 A business
4 relationship is not sufficient to “implicate the duty of a fiduciary.” Id. at 1278. Only
5 where one party is in “a relationship of dependency, or was under a specific duty
6 to act for the benefit” of the other party, does a fiduciary relationship exist. Id.
7 Where “the parties were either dealing at arm’s length, thereby lacking a
8 relationship of dominance and dependence, or the parties were not engaged in a
9 relationship of special trust and confidence,” a fiduciary duty does not exist. Id. at
10 1279.
11 The undisputed facts in this case show that the Bank and Trafalgar entered
12 into a business transaction in which the Bank would serve as security trustee. Its
13 obligations were negotiated with Trafalgar and the noteholders. There was no
14 unique degree of trust between the Bank and Trafalgar pursuant to which the Bank
15 would work primarily for Trafalgar’s benefit. Indeed, after an event of default, the
16 Indenture provides that the Bank is to act exclusively for the benefit of the
17 noteholders. Trafalgar’s contention that it was owed fiduciary duties thus fails as
1 The parties agree that Connecticut law applies to the interpretation of the Indenture.
5 1 a matter of law and the district court properly granted summary judgment as to
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12‐0768‐cv Christine Falls Corporation et al v. U.S. Bank National Association et al
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
SUMMARY ORDER
Rulings by summary order do not have precedential effect. Citation to a summary order filed on or after January 1, 2007, is permitted and is governed by Federal Rule of Appellate Procedure 32.1 and this court’s Local Rule 32.1.1. When citing a summary order in a document filed with this court, a party must cite either the Federal Appendix or an electronic database (with the notation “summary order”). A party citing a summary order must serve a copy of it on any party not represented by counsel.
1 At a stated term of the United States Court of Appeals for the Second Circuit, held 2 at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New 3 York, on the 19th day of September, two thousand thirteen. 4 5 PRESENT: 6 7 JOHN M. WALKER, 8 DEBRA ANN LIVINGSTON, 9 DENNY CHIN, 10 11 Circuit Judges. 12 _______________________________________________ 13 14 CHRISTINE FALLS CORPORATION, TRAFALGAR POWER, INC. 15 16 Petitioners‐Appellants,
17 ‐v.‐ No. 12‐0768‐cv 18 19 U.S. BANK NATIONAL ASSOCIATION, FKA STATE STREET BANK & TRUST COMPANY OF 20 CONNECTICUT,
21 Respondents‐Appellees.
22 ALGONQUIN POWER CORPORATION, INCORPORATED, ALGONQUIN POWER INCOME FUND,
1 1 ALGONQUIN POWER FUND CANADA, INC.,
2 Third Party Defendants
3 STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, N.A.,
4 Defendant 5 _______________________________________________
6 DAVID M. CAPRIOTTI , 7 Harris Beach PLLC, Pittsford, NY, for Petitioners‐ 8 Appellants.
9 JILL M. O’TOOLE (Kathleen M. LaManna, Sheila A. 10 Huddleston, on the brief), Shipman & Goodwin LLP, 11 Hartford, CT, for Respondent‐Appellee. 12 13 UPON DUE CONSIDERATION, it is hereby ORDERED, ADJUDGED, and
14 DECREED that the judgment of the District Court is AFFIRMED.
15 Petitioners‐Appellants Christine Falls Corporation and Trafalgar Power
16 (“Trafalgar”) appeal from an Amended Judgment entered on May 15, 2012, which
17 incorporated a February 21, 2012 decision and order of the United States District
18 Court for the Northern District of New York (Hurd, J.) granting summary judgment
19 in favor of U.S. Bank National Association, FKA State Street Bank & Trust (“Bank”),
20 on Trafalgar’s breach of fiduciary duty, breach of contract, and accounting claims;
21 a September 17, 2009 summary order affirming the Magistrate Judge’s order striking
22 Trafalgar’s jury trial demand; and a February 10, 2009 order dismissing Trafalgar’s
23 tort claims.
2 1 The facts of this case are well known. The underlying events have been the
2 subject of several consolidated actions, litigation has spanned more than a decade,
3 and this is one of several appeals we have heard. We assume the parties’ familiarity
4 with the background of this case and the issues on appeal.
5 * * *
6 We review the district court’s dismissal of claims on a motion to dismiss de
7 novo, “accepting all factual allegations in the complaint as true, and drawing all
8 reasonable inferences in the plaintiff’s favor.” City of Pontiac Gen. Emps.’ Ret. Sys. v.
9 MBIA, Inc., 637 F.3d 169, 173 (2d Cir. 2011) (internal citations omitted). This Court
10 reviews the district court’s grant of summary judgment de novo and will affirm
11 where there are no genuine issues of material facts to be tried and where the facts
12 warrant entry of summary judgment in the moving party’s favor as a matter of law.
13 Velez v. Sanchez, 693 F.3d 308, 313‐14 (2d Cir. 2012).
14 1. Fiduciary Duty Claim
15 The district court granted the Bank summary judgment on Trafalgar’s breach
16 of fiduciary duty claim because the undisputed facts demonstrate that the Bank did
17 not owe Trafalgar a fiduciary duty. We conclude that this determination was correct
18 and that in the absence of a fiduciary relationship between Trafalgar and the Bank,
3 1 the district court correctly granted summary judgment as to this claim. See Biller
2 Assocs. v. Peterken, 849 A.2d 847, 851 (Conn. 2004).
3 Trafalgar recognizes that the Amended and Restated Collateral Trust
4 Indenture (“Indenture”) does not provide that the Bank owes Trafalgar fiduciary
5 duties. But as we have said before, “[u]nlike the ordinary trustee, who has historic
6 common‐law duties imposed beyond those in the trust agreement, an indenture
7 trustee[’s]...duties and obligations are exclusively defined by the terms of the
8 indenture agreement.” Meckel v. Cont’l Res. Co., 758 F.2d 811, 816 (2d Cir. 1985). In
9 this case, moreover, the Indenture itself expressly prohibits implied duties in
10 § 9.1(a)(i). See Indenture § 9.1(a)(i) (“[T]he Security Trustee undertakes to perform,
11 and shall perform, such duties and only such duties as are specifically set forth in
12 this Indenture, and no implied covenants or obligations shall be read into this
13 Indenture against the Security Trustee.”). Section 9.1(e) makes this provision
14 applicable to the entire Indenture.
15 Furthermore, even if we assume arguendo that implying fiduciary duties as to
16 the Bank is permissible pursuant to Connecticut law, the relationship of these
17 parties, based on undisputed record facts, does not give rise to fiduciary obligations.
18 Fiduciary duties are implied under Connecticut law when there is a “unique degree
4 1 of trust and confidence between the parties such that the defendants undertook to
2 act primarily for the benefit of the plaintiff.” Hi‐Ho Tower, Inc. v. Com‐Tronics, Inc.,
3 761 A.2d 1268, 1279‐80 (Conn. 2000) (internal quotation marks omitted).1 A business
4 relationship is not sufficient to “implicate the duty of a fiduciary.” Id. at 1278. Only
5 where one party is in “a relationship of dependency, or was under a specific duty
6 to act for the benefit” of the other party, does a fiduciary relationship exist. Id.
7 Where “the parties were either dealing at arm’s length, thereby lacking a
8 relationship of dominance and dependence, or the parties were not engaged in a
9 relationship of special trust and confidence,” a fiduciary duty does not exist. Id. at
10 1279.
11 The undisputed facts in this case show that the Bank and Trafalgar entered
12 into a business transaction in which the Bank would serve as security trustee. Its
13 obligations were negotiated with Trafalgar and the noteholders. There was no
14 unique degree of trust between the Bank and Trafalgar pursuant to which the Bank
15 would work primarily for Trafalgar’s benefit. Indeed, after an event of default, the
16 Indenture provides that the Bank is to act exclusively for the benefit of the
17 noteholders. Trafalgar’s contention that it was owed fiduciary duties thus fails as
1 The parties agree that Connecticut law applies to the interpretation of the Indenture.
5 1 a matter of law and the district court properly granted summary judgment as to
2 Trafalgar’s breach of fiduciary duty claim. Cf. Golden W. Ref. v. Pricewaterhouse, 392
3 F. Supp. 2d 407, 414 (D. Conn. 2005) (granting summary judgment in the absence of
4 facts “suggesting a relationship of special trust or dependence beyond the
5 run‐of‐the‐mill commercial reliance of one company on the services of another”).
6 In any event, Trafalgar’s breach of fiduciary duty claims are also time‐barred.
7 The limitation period in this case, where Trafalgar is seeking money damages, is
8 three years, IDT Corp v. Morgan Stanley Dean Witter & Co., 12 N.Y.3d 132, 139 (2009)
9 (noting that the length of the statute of limitations is three years when the plaintiff
10 seeks damages and six years when he asks for equitable relief), and begins to run
11 when the “fiduciary openly repudiates the role.” Access Point Medical, LLC v.
12 Mandell, 963 N.Y.S.2d 44, 47 (N.Y. App. Div. 2013). By late September 1999, it was
13 readily apparent to Trafalgar that the Bank had openly repudiated whatever
14 relationship of dependence that Trafalgar could claim to have existed when the Bank
15 followed the noteholders’ instructions exclusively and took control of the funds to
16 Trafalgar’s detriment as detailed below. This action was not filed until more than
17 six years later.
6 1 2. Contract and Tort Claims
2 We further conclude that the district court properly dismissed Trafalgar’s
3 breach of contract and tort claims because these claims are barred by the statute of
4 limitations and Trafalgar failed to raise a material issue of fact to the contrary.2 As
5 to the contract claim, a six year statute of limitations governs, see N.Y. C.P.L.R. §
6 213(2), and the statute commences to run when the contract is breached. See, e.g., T
7 & N PLC v. Fred S. James & Co., 29 F.3d 57, 60 (2d Cir. 1994). Trafalgar alleges that
8 the Bank breached the Indenture by approving disbursement requests not in
9 compliance with the Indenture’s terms and argues that any disbursements by the
10 Bank, including those made after the noteholders had declared an event of default
11 and under the supervision of the bankruptcy court, restart the limitations period.
12 We disagree.
13 Declaring an event of default on the part of Trafalgar, the noteholders gave
14 the Bank instructions on September 14, 1999 to take possession of the funds in the
15 operating bank account and to remit the funds to the noteholders on an ongoing
16 basis. The Bank complied with these instructions no later than September 20, 1999.
2 The parties agree that New York statute of limitations, accrual, and tolling rules apply. In light of our disposition here, we do not address the district court’s holding that Trafalgar’s tort claims are barred by the economic loss rule.
7 1 Pursuant to Trafalgar’s theory that the Bank thereby breached its obligations under
2 the Indenture, payments occurring after this date, including those under the
3 direction and supervision of the bankruptcy court, do not constitute a new breach
4 for statute of limitations purposes. Instead they are “just another diversion of
5 [monies]” following the earlier breach pursuant to which the Bank had already
6 repudiated any contractual obligations owed to Trafalgar. Amirthmasebi v.
7 Benyamini, 760 N.Y.S.2d 887, 887‐88 (N.Y. App. Div. 2003); Welwart v. Dataware Elecs.
8 Corp., 717 N.Y.S.2d 220, 221 (N.Y. App. Div. 2000) (limitations period began when
9 defendants first began diverting profits, not each time profits were subsequently
10 diverted). Thus, the last date that Trafalgar’s breach of contract claim could have
11 accrued was September 20, 1999. Because Trafalgar failed to file its Complaint until
12 December 2005, its claims are time‐barred.
13 All of Trafalgar’s tort claims are similarly barred by the statute of limitations.
14 A three year statute of limitations applies to Trafalgar’s conversion and negligence
15 claims, and a six year limit applies to its claim for constructive fraud. N.Y. C.P.L.R.
16 §§ 214(3) (conversion), 214(4) (negligence), 213(8) (fraud). Trafalgar’s initial
17 Complaint alleged wrongful conduct in connection with the Bank’s disbursements.
18 Trafalgar’s Amended Complaint (filed on August 13, 2008) asserted additional tort
8 1 allegations regarding the Bank’s role in taking control of the operating account on
2 behalf of the noteholders after the noteholders declared an event of default in
3 September 1999. Trafalgar’s theory is that the Bank wrongfully carried out the
4 noteholders’ instructions and thereby wrongfully assumed control of the operating
5 account for the exclusive benefit of the noteholders. Thus, under Trafalgar’s theory,
6 the tort (assuming it occurred) was completed by September 20, 1999 when the Bank
7 took control of the operating account on behalf of the noteholders, thereafter taking
8 “possession of all sums on deposit with [the Bank] ... and remit[ting] all such funds
9 to [Algonquin].” Thus, even if the Amended Complaint relates back, Trafalgar’s tort
10 claims are barred by the statute of limitations because they were not brought within
11 six years of the date of accrual.
12 Affirming the dismissal of Trafalgar’s claims, we need not and do not address
13 Trafalgar’s argument that it is entitled to a jury trial. We have reviewed Trafalgar’s
14 remaining arguments and find them to be without merit. For the foregoing reasons,
15 the judgment of the District Court is AFFIRMED.
16 FOR THE COURT: 17 Catherine O’Hagan Wolfe, Clerk