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BANQUE DE GESTION PRIVEE-SIB v. LA REPUBLICA DE PA

February 24, 1992

BANQUE DE GESTION PRIVEE-SIB, Plaintiff, against LA REPUBLICA DE PARAGUAY and BANCO CENTRAL DEL PARAGUAY, Defendants.


The opinion of the court was delivered by: MICHAEL B. MUKASEY

 MICHAEL B. MUKASEY, U.S.D.J.

 Plaintiff, a French bank, has sued the Republic of Paraguay and Banco Central del Paraguay, to enforce the terms of six loan agreements, all but one of which were guaranteed by the Central Bank. Plaintiff now moves for partial summary judgment pursuant to Rule 56(a) Fed. R. Civ. P., seeking judgment on Claims One and Four, which relate respectively to the Hospital Loan Agreement and the Alcohol Loan Agreement. For the reasons set forth below, plaintiff's motion is granted.

 I.

 During the late 1970's and early 1980's, Paraguay substantially increased its foreign sovereign debt. Much of this debt is outstanding on loan agreements on which Paraguay is the obligor and/or Banco Central is the guarantor or obligor ("the LDC Debt"). (Def. Mem. at 4) Plaintiff sues upon six such loan agreements and related guarantees ("the Debt").

 In 1987, Paraguay and Banco Central began defaulting on the LDC Debt and, by 1988, they had defaulted on the Debt. (Ortiz Aff. P2) The LDC Debt began to trade at a discount from its face value on the secondary market for the debt of lesser developed countries. (Def. Mem. at 5)

 Sometime in late 1989 or early 1990, Paraguay instituted a program to repurchase, on a confidential basis, the LDC Debt on the secondary market. (Def. Mem. at 6,7) During the initial stages of this program, Finance Consult served as Paraguay's exclusive repurchasing agent. By July 1991, Finance Consult had been replaced. (Ortiz Aff. P15; Pritchard Aff. Ex. 1)

 In August 1991, Michel Sperry, Finance Consult's principal, approached plaintiff with a plan to solicit holders of the Debt to assign their Debt to plaintiff. Various of these assignments were ultimately effected through three separate agreements: (1) a straight assignment in favor of plaintiff; (2) a promissory note and option agreement; and (3) a sharing agreement. Under the terms of the option agreements, plaintiff has a 90-day option period during which it can pay the dollar amount named on the relevant assignment agreement, or it can resell the Debt to the assignor for that same dollar amount. (Cizeron Dep. at 95-96)

 The sharing agreements allocate potential costs and profits from recovery on the Debt. Typically, the agreements state that "BGP, assisted by Finance Consult, will undertake certain measures to attempt to recover payment on the assigned Debt." (Pritchard Aff. Ex. 4 at 1) The agreements then set forth BGP's authority "to initiate and conclude in its discretion any Action, Negotiation and/or Settlement that it deems necessary or desirable to recover all or part of the amounts owed by the Debtors in principal and interest related to the [Debt]." (Id. at 2)

 II.

 Fed. R. Civ. P. 56(c) requires a summary judgment if the evidence demonstrates that "there is no genuine issue as to any material fact and [that] the moving party is entitled to judgment as a matter of law." Anderson v. Liberty Lobby Inc., 477 U.S. 242, 250, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). "Summary judgment is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed to 'secure the just, speedy and inexpensive determination of every action.'" Celotex Corp. v. Catrett, 477 U.S. 317, 327, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986) (quoting Fed. R. Civ. P. 1).

 In determining whether there is a genuine issue of material fact, a court must resolve all ambiguities, and draw all inferences, against the moving party. See United States v. Diebold, Inc., 369 U.S. 654, 655, 8 L. Ed. 2d 176, 82 S. Ct. 993 (1962) (per curiam); Donahue v. Windsor Locks Bd. of Fire Comm'rs, 834 F.2d 54, 57 (2d Cir. 1987). However, the mere existence of disputed factual issues is insufficient to defeat a motion for summary judgement. Knight v. United States Fire Ins. Co., 804 F.2d 9, 11-12 (2d Cir. 1986), cert. denied, 480 U.S. 932, 94 L. Ed. 2d 762, 107 S. Ct. 1570 (1987). The disputed issues of fact must be "material to the outcome of the litigation," id. at 11, and must be backed by evidence that would allow "a rational trier of fact to find for the non-moving party." Matsushita Electrical Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986). The non-movant "must do more than simply show that there is some metaphysical doubt as to the material facts." Id. With respect to materiality, "substantive law will identify which facts are material. Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted." Anderson at 248.

 Summary judgment is "ordinarily inappropriate where an individual's intent and state of mind are implicated." Meiri v. Dacon, 759 F.2d 989, 998 (2d Cir.), cert. denied, 474 U.S. 829, 88 L. Ed. 2d 74, 106 S. Ct. 91 (1985). However, "the state of mind exception . . . is appropriate only where solid circumstantial evidence exists to prove [defendants'] case." Clements v. County of Nassau, 835 F.2d 1000, 1005 (2d Cir. 1987).

 In response to plaintiff's motion for partial summary judgment, defendants do not question the merits of plaintiff's claim but raise the affirmative defense of champerty. Therefore, defendants must "show specific facts warranting a trial" with respect to their champerty defense, Consumers Union of United States, Inc. v. Campbell, 1989 U.S. Dist. LEXIS 13634, at *8 (S.D.N.Y. 1989); see also Northwestern Nat'l Ins. Co. v. ...


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