§ 618-A — Repudiation of contracts

§ 618-a. Repudiation of contracts. 1. Except as otherwise provided in\nthis section, when the superintendent has taken possession of the\nbusiness and property in this state of a banking organization, unless\nthe federal regulator or insurer is appointed as receiver or liquidator,\nthe superintendent may assume or repudiate any contract, including an\nunexpired lease, of the banking organization: (a) to which such banking\norganization is a party, (b) the performance of which the\nsuperintendent, in the superintendent's discretion, determines to be\nburdensome, and (c) the repudiation of which the superintendent\ndetermines, in the superintendent's discretion, will promote the orderly\nadministration of the banking organization's affairs. After the\nexpiration of ninety days from the date that the superintendent takes\npossession of the banking organization, any party to a contract with the\nbanking organization being liquidated may demand in writing that the\nsuperintendent assume or repudiate such contract. If the superintendent\nhas not assumed or repudiated the contract within fifteen calendar days\nfrom the date of receipt of the demand by the superintendent, the\naffected party may bring an action in the supreme court in the judicial\ndistrict in which the principal office of the banking organization is\nlocated to obtain an order requiring the superintendent to decide\nwhether to assume or repudiate that contract. If the superintendent has\nnot assumed or repudiated a contract by one month before the last date\nfor filing claims against the banking organization being liquidated\npursuant to section six hundred twenty of this article, such contract\nshall be deemed repudiated. Notwithstanding the foregoing, with respect\nto an unexpired lease of the banking organization for the rental of real\nproperty under which the banking organization was a lessee, if the\nsuperintendent remains in possession of the leasehold, the\nsuperintendent shall not be required to assume or repudiate such lease\nand may continue in possession of such leasehold for the remainder of\nthe term of the lease in accordance with the terms of the lease;\nprovided, however, that should the superintendent later repudiate the\nlease before the end of the lease term, any amounts that may be due the\nlessor due to such repudiation shall be calculated according to the\nprovisions of paragraph (a) of subdivision three of this section.\nNotwithstanding any other provision contained in this subdivision, in\nliquidating a branch or agency of a foreign banking corporation, the\nsuperintendent shall not assume or repudiate any qualified financial\ncontract that the branch or agency entered into which is subject to a\nmulti-branch netting agreement or arrangement that provides for netting\npresent or future payment obligations or payment entitlements (including\ntermination or close-out values relating to the obligations or\nentitlements) among the parties to the contract and agreement or\narrangement and the superintendent shall not be required to assume or\nrepudiate any other qualified financial contract that the branch or\nagency entered into; provided, however, that upon any repudiation of any\nqualified financial contract or the termination or liquidation of any\nqualified financial contract in accordance with its terms, the liability\nof the superintendent under such qualified financial contract shall be\ndetermined in accordance with subdivision two of this section.\n 2. (a) Except as otherwise provided in this section, upon the\nrepudiation or termination of any contract pursuant to subdivision one\nof this section, the liability of the superintendent shall be limited to\nthe actual direct compensatory damages of the parties to the contract,\ndetermined as of the date the superintendent took possession of the\nbanking organization. The superintendent shall not be liable for any\nfuture wages other than severance payments (to the extent such payments\nare reasonable), or for payments for future services, costs of cover, or\nany consequential, punitive or exemplary damages, damages for lost\nprofits or lost opportunity or damages for pain and suffering.\n (b) Except as otherwise provided in this section, the liability of the\nsuperintendent upon the repudiation of any qualified financial contract,\nor in connection with the termination or liquidation of any qualified\nfinancial contract in accordance with the terms thereof, shall be\nlimited as provided in paragraph (a) of this subdivision, except that\ncompensatory damages shall be deemed to include normal and reasonable\ncosts of cover or other reasonable measures of damages utilized among\nparticipants in the market for qualified financial contract claims,\ncalculated as of the date of repudiation or the date of the termination\nof such qualified financial contract in accordance with its terms. Upon\nthe repudiation of any qualified financial contract or in connection\nwith the termination or liquidation of any qualified financial contract\nin accordance with the terms thereof, if the superintendent shall be\nentitled to damages, such damages shall be paid over by the party to the\nsuperintendent upon written demand pursuant to subdivision two of\nsection six hundred fifteen of this article, notwithstanding any\nprovision in any such contract that purports to effect a forfeiture of\nsuch damages.\n (c) In the case of the liquidation of a branch or agency of a foreign\nbanking corporation by the superintendent, with respect to qualified\nfinancial contracts subject to netting agreements or arrangements that\nprovide for netting present or future payment obligations or payment\nentitlements (including termination or close-out values relating to the\nobligations or entitlements) among the parties to the contracts and\nagreements or arrangements, the liability of the superintendent to any\nparty to any such qualified financial contract upon repudiation or in\nconnection with the termination or liquidation of such qualified\nfinancial contract in accordance with the terms thereof, shall be\ncalculated as of the date of repudiation or the date of the termination\nof such qualified financial contract in accordance with its terms and\nshall be limited to the lesser of (i) the global net payment obligation\nand (ii) the branch/agency net payment obligation. The liability of the\nsuperintendent under this paragraph shall be reduced by any amount\notherwise paid to or received by the party in respect of the global net\npayment obligation pursuant to such qualified financial contract which\nif added to the liability of the superintendent under this paragraph\nwould exceed the global net payment obligation. The liability of the\nsuperintendent under this paragraph to a party to a qualified financial\ncontract also shall be reduced by the fair market value or the amount of\nany proceeds of collateral that secures and has been applied to satisfy\nthe obligations of the foreign banking corporation pursuant to such\nqualified financial contract to the party. In the event that netting\nunder the applicable netting agreement or arrangement results in a\nbranch/agency net payment entitlement, notwithstanding any provision in\nany such contract that purports to effect a forfeiture of such\nentitlement, the superintendent may make written demand upon the party\nto such contract under subdivision two of section six hundred fifteen of\nthis article for an amount not to exceed the lesser of (x) the global\nnet payment entitlement and (y) the branch/agency net payment\nentitlement. The liability of the party under this paragraph shall be\nreduced by any amount otherwise paid to or received by the\nsuperintendent or any other liquidator or receiver of the foreign\nbanking corporation in respect of the global net payment entitlement\npursuant to such qualified financial contract which if added to the\nliability of the party under this paragraph would exceed the global net\npayment entitlement. The liability of the party under this paragraph to\nthe superintendent pursuant to such qualified financial contract also\nshall be reduced by the fair market value or the amount of any proceeds\nof collateral that secures and has been applied to satisfy the\nobligations of the party pursuant to such qualified financial contract\nto the foreign banking corporation.\n (d) A party to a qualified financial contract with a foreign banking\ncorporation, the branch or agency of which the superintendent is\nliquidating, which party has a perfected security interest in\ncollateral, or other valid lien or security interest in collateral\nenforceable against third parties pursuant to a security arrangement\nrelated to such qualified financial contract, may retain all such\ncollateral and upon repudiation of that qualified financial contract, or\nin connection with the termination or liquidation of that qualified\nfinancial contract in accordance with its terms thereof, apply such\ncollateral in satisfaction of any claims secured by the collateral,\nprovided that the total amount so applied to such claims shall in no\nevent exceed the global net payment obligation, if any.\n (e) The following terms shall have the following meanings: (i)\n"qualified financial contract" means any securities contract, commodity\ncontract, forward contract (including spot and forward foreign\nexchange), repurchase agreement, swap agreement, and any similar\nagreement, any option to enter into any such agreement, including any\ncombination of the foregoing, and any master agreement for such\nagreements (such master agreement, together with all supplements\nthereto, shall be treated as one qualified financial contract), provided\nthat such contract, option or agreement, or combination of contracts,\noptions or agreements is reflected in the books, accounts or records of\nthe banking organization or a party provides documentary evidence of\nsuch agreement; the superintendent may define by regulation securities\ncontract, commodity contract, forward contract, repurchase agreement and\nswap agreement, and may by regulation or order determine any other\nagreement to be a qualified financial contract for purposes of this\nparagraph; (ii) "global net payment obligation" means the amount, if\nany, owed by a foreign banking corporation as a whole to a party after\ngiving effect to the netting provisions of a qualified financial\ncontract with respect to all transactions subject to netting under such\nqualified financial contract; (iii) "global net payment entitlement"\nmeans the amount, if any, owed by a party (or that would be owed if the\nrelevant agreements provided for payments to either party, upon\ntermination thereof under any and all circumstances) to a foreign\nbanking corporation as a whole after giving effect to the netting\nprovisions of a qualified financial contract with respect to all\ntransactions subject to netting under such qualified financial contract;\n(iv) "branch/agency net payment obligation" means with respect to a\nqualified financial contact the amount, if any, that would have been\nowed by the foreign banking corporation to a party after netting only\nthose transactions entered into by the branch or agency and such party\nunder such qualified financial contract; and (v) "branch/agency net\npayment entitlement" means with respect to a qualified financial\ncontract the amount, if any, that would have been owed by a party to the\nforeign banking corporation after netting only those transactions\nentered into by the branch or agency and such party under such qualified\nfinancial contract. The superintendent shall have authority to prescribe\nsuch regulations relating to qualified financial contracts and netting\nthereof as the superintendent shall deem appropriate.\n 3. (a) If the superintendent repudiates a lease of the banking\norganization for the rental of real or personal property under which the\nbanking organization was a lessee, the lessor under such lease shall be\nentitled to file a claim with the superintendent for whichever is the\nleast amount of: (i) the amount designated as liquidated damages\ncontained in the agreement between the banking organization and the\nlessor, (ii) an amount equal to one year's rent under the terms of the\nrepudiated lease, or (iii) an amount equal to the rent for the remaining\nterm of the lease.\n (b) If the superintendent repudiates a lease of the banking\norganization for the rental of real property under which the banking\norganization was a lessor, and the lessee was not in default at the time\nof repudiation, the lessee under such repudiated lease may either (i)\ntreat the lease as terminated by such repudiation and vacate the\npremises, or (ii) remain in possession of the leasehold interest for the\nbalance of the term of the lease, and for any renewal or extension of\nsuch term that is enforceable by such lessee under applicable\nnon-insolvency law, unless the lessee defaults under the terms of the\nlease after the date of such repudiation. If the lessee remains in\npossession of the leasehold interest, the lessee shall continue to pay\nto the superintendent the contractual rent pursuant to the terms of the\nlease after the date of the repudiation of such lease, and may offset\nagainst such rent payment any damages which may accrue due to the\nnonperformance of any obligation of the banking organization under the\nlease after the date of repudiation. The superintendent shall not be\nliable to the lessee for any damages arising after such date as a result\nof the repudiation other than the amount of any offset allowed under\nthis subdivision. Nothing stated herein shall prohibit the\nsuperintendent from entering into a new contract with the lessee for the\nrental of the leasehold which was the subject of the repudiated lease.\n 4. Except as otherwise provided, notwithstanding any provision in an\nunexpired lease or other contract, or in applicable law, a contract or\nunexpired lease of the banking organization may not be terminated or\nmodified by any party other than the superintendent without the\nconcurrence of the superintendent, and any right or obligation under\nsuch contract or lease may not be terminated or modified, at any time\nafter the superintendent's taking of possession, solely pursuant to a\nprovision in such contract or lease that is conditioned on the\nsuperintendent's taking of possession, or the insolvency, financial\ncondition or liquidation of the banking organization.\n 5. Nothing in this section shall affect the right of a party to a\ncontract of a foreign banking corporation to seek performance of such\ncontract or damages thereon in any other jurisdiction, provided,\nhowever, that the superintendent shall not be liable for the performance\nof such contract or damages thereon in any other jurisdiction.\n 6. The rights granted herein are in addition to any other rights\navailable to the superintendent under common law or any other law.\n