other except in the exercise of utmost good faith . . . . A fiduciary relation exists when confidence is reposed on one side and there is resulting superiority and influence on the other.
Mobil Oil Corporation v. Rubenfeld, 72 Misc. 2d 392, 339 N.Y.S.2d 623, 632 (1972), rev'd on other grounds, 48 A.D.2d 428, 370 N.Y.S.2d 943 (1975); accord, CBS, Inc. v. Ahern, 108 F.R.D. 14 (S.D.N.Y. 1985) (citing United States v. Reed, 601 F. Supp. 685, 707 (S.D.N.Y. 1985); Penato v. George, 52 A.D.2d 939, 942, 383 N.Y.S.2d 900, 904-05 (2d Dept. 1976), appeal dismissed, 42 N.Y.2d 908, 397 N.Y.S.2d 1004, 366 N.E.2d 1358 (1977)).
New York law is also quite clear, however, that "a conventional business relationship, without more, does not become a fiduciary relationship by mere allegation." Oursler v. Women's Interart Center, Inc., 170 A.D.2d 407, 566 N.Y.S.2d 295 (1st Dept. 1991). Indeed, New York Courts have rejected the proposition that a fiduciary relationship can arise between parties to a business transaction, National Westminster Bank, U.S.A. v. Ross, 130 Bankr. 656, 679 (S.D.N.Y. 1991) (citing Beneficial Commercial Corp. v. Murray Glick Datsun, 601 F. Supp. 770, 772 (S.D.N.Y. 1985)), and have concluded that where parties deal at arms length in a commercial transaction, no relation of confidence or trust sufficient to find the existence of a fiduciary relationship will arise absent extraordinary circumstances." National Westminster Bank, 130 Bankr. at 679 (citations omitted).
In this case, CSAV has failed to set forth evidence that the dealings between the parties were not arms-length, or that there were extraordinary circumstances that would give rise to a fiduciary relationship between the parties. In fact, the record conclusively establishes that CSAV and Schroder were parties with equivalent knowledge engaged in mutually beneficial, arms-length commercial transactions.
First, it is clear from the record that both Schroder and CSAV were sophisticated parties. CSAV and Chilean Line were run by individuals who very knowledgeable about the foreign currency market. They participated in complex foreign exchange "swap" operations with the Central Bank of Chile, Grez Tr., at 138; bought and sold Chilean debt in the market to pro fit from favorable dollar/peso exchange rates, Grez Tr., at 135; purchased yen futures from Chase, Geis Tr., at 111; engaged in dollar/yen "forward swaps" and "reconversions" with First Maryland, Geis Tr., at 113; were "absolutely" familiar with the process of "hedging" their foreign currency exposure, Grez Tr., at 126; and investigated sophisticated hedging devices such as the "Philadelphia option," Geis Tr., at 87-92.
Second, even if the Court finds that Schroder provided CSAV with an unique international cash management service, did not trade with CSAV as to each currency transaction, and promised to convert CSAV's currency at favorable rates, there is no evidence to support CSAV's allegation that this was a fiduciary relationship rather than an arms-length relationship. There is not a scintilla of evidence that the agreements between the parties were a result of unequal bargaining power or that Schroder acquired any influence over CSAV. In fact, the record establishes that this was a typical arms-length relationship designed to further the interests of the respective parties. In 1988, despite its longstanding ties to CSAV, Schroder told CSAV not to count on any credit from Schroder in the future, Grez Tr., at 192; Exhibit "46" to Def. App., and basically terminated its relationship with CSAV in all areas except foreign exchange because it was no longer profitable to maintain Latin American banking relationships. Moreover, although CSAV employees testified that they believed that they were not free to take their business elsewhere, Geis Tr., at 52, the abrupt termination of the relationship by CSAV in June 1990 indicates that this was an arms-length relationship that would continue until CSAV found that it could get superior rates elsewhere.
CSAV is correct when it argues that there are circumstances where a fiduciary relationship might be found to exist "based upon prior business dealings", Apple Records, Inc. v. Capitol Records, Inc., 137 A.D.2d 50, 57 529 N.Y.S.2d 279, 283 (1st Dep't 1988) (quoting Penato v. George, 52 A.D.2d 939, 942, 383 N.Y.S.2d 900, 904-05 (2d Dep't 1976), appeal dismissed, 42 N.Y.2d 908, 397 N.Y.S.2d 1004, 366 N.E.2d 1358 (1977)); see also, Gittes v. Cook International, 598 F. Supp. 717, 723 (S.D.N.Y. 1984), but CSAV has not established that such circumstances are present in this case. In Apple Records, the court's decision was based largely on the fact that plaintiffs' breach of fiduciary duty claim was inextricably linked to their cognizable claims for fraudulent concealment and fraudulent representation. Apple Records, 529 N.Y.S.2d at 283 ("it can be said that from such a long enduring relationship was borne a special relationship of trust and confidence, one which existed independent of the contractual duties, and one which plaintiffs argue was betrayed by fraud in secretly selling records claimed as scrapped and in diluting the market and exploiting the Beatles' popularity with excessive distribution of promotional copies to benefit other aspects of defendants' business.") (emphasis added). Even the format of the opinion indicates the link as plaintiffs' claims for fraud and breach of fiduciary duty are discussed by the court in an almost interchangeable manner. Id. at 283. It is also clear that the court upheld the breach of fiduciary duty cause of action in Apple Records because the plaintiffs alleged that defendants breached their duty as bailees, a claim that is not asserted by CSAV in the case at hand. Thus, the court did not uphold the breach of fiduciary claim merely because the parties had a close 26 year business relationship.
Further, CSAV establishes no other basis for the existence of a fiduciary relationship. CSAV's allegations that the "nostro accounts" were "special accounts" which turn a debtor-creditor relationship into a fiduciary one, are unfounded, and its assertion that a fiduciary relationship was established because Schroder held CSAV's currencies in its "nostro accounts" for the benefit of CSAV, is without foundation.
In addition, CSAV evinces no evidence to establish that Schroder owed it fiduciary duties as either an agent or a trustee.
Thus, the Court concludes that CSAV's allegations that it reposed trust and confidence in Schroder and relied upon Schroder to give CSAV the best rates are merely an effort to avoid the repercussions of its lack of diligence in monitoring the rates at which conversions were made for over six years, and finds that Schroder is entitled to summary judgment on CSAV's breach of fiduciary duty claim.
D. Broach of Contract Claim
1. CSAV's Contentions
CSAV claims that the evidence establishes that there was an oral agreement between Schroder and CSAV regarding the management by Schroder of a conversion program for CSAV's currencies. CSAV contends that under this contract, it was obligated to remit all of its European currencies to Schroder's "nostro accounts," and Schroder was required to automatically convert those currencies to U.S. dollars and give CSAV a rate at or near the interbank rate. CSAV also contends that Schroder breached this agreement when it applied rates far in excess of the rates it agreed to apply.
2. Schroder's Contentions
Schroder contends that CSAV has produced no written contract which governs all of the parties' currency transactions, nor has any witness testified that such an agreement existed. See Grez Tr., at 34-35; Geis Tr., at 120; Suttie Tr., at 129, 135-36; Seeley Tr., at 29-30, 32; Wan Tr., at 300-01; Raphael Tr., at 60; Espinosa Tr., at 170-71; Hasselbach Tr., at 351. Thus, if any contract exists it must be an oral, unwritten agreement, as CSAV concedes. According to Schroder, however, CSAV's claim of the existence of an oral contract ignores the legal effect of the written confirmations that it regularly received. Because the specific terms of every foreign currency exchange, including the price term, were confirmed in writing to CSAV, Schroder argues that the parol evidence rule precludes CSAV from contradicting those written terms based on an alleged oral agreement. Moreover, Schroder claims that even if evidence of the alleged oral agreement was not barred by the parol evidence rule, the oral agreement is not an enforceable contract as a matter of law because "[it] is vapor." Def. Mem., at 18. None of CSAV's witnesses has any first-hand knowledge about the alleged oral agreement, its terms, the individuals who negotiated it, or when it was made. In addition, Schroder's witnesses have no knowledge of any oral agreement with CSAV respecting foreign exchange rates. Further, it is unenforceable because there is substantial confusion on the part of CSAV as to what the purported contract requires. On the strength of these arguments, Schroder moves for summary judgment on CSAV's breach of contract claim.
For the reasons set forth below, the Court denies Schroder's motion for summary judgment on CSAV's breach of contract claim.
a. Oral Agreement
It is undisputed that there was no written contract which governed all of the foreign currency exchange transactions between the parties. However, the record establishes at least a genuine issue of material fact as to whether an oral agreement existed between Schroder and CSAV regarding the management by Schroder of a conversion program for CSAV's currencies.
In order to determine whether the parties entered into an oral agreement and the terms of such an agreement,
it is necessary to look . . . to the objective manifestations of the intent of the parties as gathered by their expressed words and deeds. In doing so disproportionate emphasis is not to be put on any single act, phrase or other expression, but, instead, on the totality of all of these, given the attendant circumstances, the situation of the parties, and the objectives they were striving to attain.
Brown Brothers Electrical Contractors, Inc. v. Beam Construction Corp., 41 N.Y.2d 397, 399-400, 393 N.Y.S.2d 350, 352, 361 N.E.2d 999, 1001 (1977) (citations omitted). Further, "[it] is necessary that the totality of all the acts of the parties, their relationship and their objectives be considered in order to determine whether they entered into an oral agreement . . . ." P.J. Carlin Construction Co. v. Whiffen Electric Co., Inc., 66 A.D.2d 684, 411 N.Y.S.2d 27, 29 (1st Dept. 1978).
In this case, the most compelling evidence for the existence of an oral agreement is the absence of other explanation for the relationship that developed between CSAV and Schroder. It is implausible that Schroder set up accounts in Europe to accept CSAV's European currencies, converted those currencies to U.S. dollars automatically and without prior consultation with CSAV,
and CSAV agents remitted their European currencies exclusively to Schroder, without the existence of any overarching oral agreement between the parties.
Further evidence for the existence of an agreement is provided by both CSAV and Schroder witnesses. CSAV witnesses have testified that CSAV was obligated to remit all of its European currencies to Schroder for conversion, and that Schroder was obligated to give CSAV the best available rates. Specifically, Grez stated that Geis and three other CSAV executives each described the contract to him. Grez Tr., at 35-36. Each of the executives told Grez that CSAV was bound to remit its European currencies to Schroder, and Schroder would give "special consideration" to CSAV. In addition, Schroder would automatically convert the currencies into U.S. dollars at "the best possible exchange rate," to be determined by reference to a benchmark such as the "Reuters, Frankfurt or New York" interbank rates. Grez Tr., at 35-38, 41-45, 56, 248. Moreover, Suttie testified that she was told by a Schroder employee that "because of the monies we put through the account[,] [Schroder] would give us the best rate in the market." Suttie Tr., at 54-55. She also testified that CSAV had an "exclusive arrangement" whereby "all European currencies must go to Schroder," Suttie Tr, at 146, and because of the exclusivity, "Schroder was working on [CSAV's] behalf, [and] they were getting us an honest rate." Id. at 52.
Finally, Geis has testified that he was told that "for years -- nobody knew when -- all of CSAV's European currencies were remitted to Schroder for conversion," Geis Tr., at 52, and that, in return, Schroder "converted [the currencies] and credited our account" and gave CSAV "preferential rates." Geis Tr., at 48-50.
Schroder witnesses have also provided testimony which tends to corroborate the existence of an oral agreement. Tygier has stated that Schroder "agreed to manage" and did manage the foreign currency activities for CSAV and was "committed" to give CSAV a rate at or near the interbank rate. Tygier Aff., at paras. 2, 3, 5. Further, Schroder's former Chairman Hamway has testified that he believed Schroder was providing CSAV with an international cash management service that was not provided to any other Schroder client. Hamway Tr., at 175-177.
That none of CSAV witnesses has first-hand information about the oral agreement, its terms, the individuals who negotiated it or when it was made, does not warrant a finding that there was no oral agreement as a matter of law. It simply indicates that the alleged agreement was in existence prior to the involvement of the present witnesses.
Based on the circumstances of the relationship between Schroder and CSAV, and the testimony of both Schroder and CSAV witnesses, the Court finds that a jury could conclude that the parties were operating pursuant to an overarching agreement which provided that CSAV remit all of its European currencies to Schroder and Schroder convert these currencies at preferential rates.
Schroder argues, however, that even if the Court finds that an oral agreement exists, the inability of CSAV's witnesses to articulate the terms of the alleged oral understanding make the contract unenforceable. According to Schroder, CSAV's claimed entitlement to numerous and inconsistent rates makes the contract too vague and indefinite to be enforceable. As support for its position, Schroder cites the various rates claimed by CSAV employees at different times. At a meeting with Schroder officials in June 1990, Grez claimed the company was contractually entitled to "the best possible exchange rate." Grez Tr., at 246-48. A month later, CSAV claimed that the contract entitled it to "market rates no less favorable to us than those which would have been available to us from other first class international banks." Grez Tr., at 267; Exhibit "20" to Def. App. In a letter to the Court dated March 29, 1991, CSAV's counsel claimed that Schroder agreed to give CSAV a rate "equal to or better than that, given to other customers." To further emphasize the confusion over what the contract purportedly required, Schroder highlights the inconsistencies in Geis' testimony. At varying times, Geis testified that CSAV's contractual rate could be higher than some market rates, Geis Tr., at 380; that CSAV had previously received the "million dollar rate" from Schroder, Geis Tr., at 65-66; that the "best possible rate" was the same as the "million dollar rate," Geis Tr., at 378; that the "best possible rate" equalled the interbank rate, Geis Tr., at 310-11; that the "million dollar rate" differed from the interbank rate, Geis Tr., 237-38; that CSAV was entitled to the "spot rate," Geis Tr., at 93; that he understood the "spot rate" to mean the "million dollar rate," Geis Tr., at 93; and that he now understands "spot rate" to refer to any exchange rate in a transaction maturing within two days. Geis Tr., at 101, 341.
It is well established that
[A] price term is not necessarily indefinite because the agreement fails to specify a dollar figure, or leaves fixing the amount for the future, or contains no computational formula. Where at the time of the agreement the parties have manifested their intent to be bound, a price term may be sufficiently definite if the amount can be determined objectively without the need for new expressions by the parties; a method for reducing uncertainty to certainty might, for example, be found within the agreement, or ascertained by reference to an extrinsic event, commercial practice, or trade usage.
Cobble Hill Nursing Home, Inc. v. Henry & Warren Corp., 74 N.Y.2d 475, 483, 548 N.Y.S.2d 920, 923, 548 N.E.2d 203 (1989), cert. denied, 112 L. Ed. 2d 33, 111 S. Ct. 58 (1990). Thus, if the parties "specify a practicable method by which the price can be determined by the court without any new expressions by the parties themselves," the agreement is enforceable. In re McManus, 83 A.D.2d 553, 554, 440 N.Y.S.2d 954, 957 (2d Dept. 1981), aff'd, 55 N.Y.2d 855, 447 N.Y.S.2d 708, 432 N.E.2d 601 (1982).
In this case, CSAV has submitted sufficient evidence so that the Court could determine the price without any new expressions by the parties. Although there have been slight variations in the testimony as to what rate the agreement requires, a jury could determine that CSAV was simply entitled to the best rate Schroder gave, and thus the price can be determined by reviewing the interbank rates, fair profit margins and rates Schroder and other banks gave to preferred customers
b. Parol Evidence Rule
As codified in Article 2 of New York's Uniform Commercial Code,
the parol evidence rule states:
Final Written Expression: Parol or Extrinsic Evidence Terms with respect to which the confirmatory memoranda of the parties agree or rich are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement . . . .
N.Y. U.C.C. § 202-2.
Schroder's principal defense to CSAV's breach of contract claim is that evidence of the oral "management" agreement is precluded by the parol evidence rule because, as a prior oral agreement, it cannot serve to vary or contradict the price terms of more than one thousand written contracts evinced by confirmation slips. Specifically, Schroder claims that each of the individual conversions must be viewed as an independent contract, separate and apart from the management agreement pursuant to which all conversions were effectuated. Viewed as such, Schroder argues that because it sent CSAV a written confirmation of each conversion, setting forth the actual numerical rate at which the particular conversion was made, the parol evidence rule precludes CSAV from contradicting those written terms and arguing that the excessive rates charged by Schroder breached the alleged oral agreement. For this proposition, Schroder relies almost exclusively on Intershoe, Inc. v. Bankers Trust Co., 77 N.Y.2d 517, 569 N.Y.S.2d 333, 571 N.E.2d 641 (1991), a 1991 New York Court of Appeals case which, according to Schroder, applied N.Y. U.C.C. § 2-202 to written foreign exchange confirmations similar to Schroder's.
In Intershoe, the plaintiff ("Intershoe") was a shoe importer that used foreign currencies in transacting its business. On March 13, 1985, Intershoe entered into a foreign currency transaction over the phone with defendant Bankers Trust Co. ("Bankers"), involving Italian lira. Following the telephone conversation, Bankers sent Intershoe a written confirmation which stated: "WE HAVE BOUGHT FROM YOU ITL 537,750,000" and "WE HAVE SOLD TO YOU USD 250,000.00." The confirmation also reflected the rate at which the transaction was completed, and stated that delivery of the lira was scheduled to take place some 7 and 1/2 months later. Intershoe's treasurer subsequently signed the confirmation and returned it to Bankers. Intershoe, 77 N.Y.2d at 520, 569 N.Y.S.2d at 334-35.
Seven months later, as the value date arrived, Intershoe claimed that the confirmation it had signed mistakenly reflected that it was selling lira when the oral agreement had actually provided for Intershoe to purchase lira. Intershoe refused to pay the lira to Bankers, and Bankers was forced to purchase lira in the open market. Intershoe, 77 N.Y.2d at 520, 569 N.Y.S.2d at 335.
The New York Court of Appeals held that the parol evidence rule prevented Intershoe from claiming that the deal was actually a purchase and not a sale of lira. The court reasoned that the essential terms of the transaction were plainly set forth in the confirmation slip which Intershoe had signed and returned, signifying its acceptance of those terms. Intershoe, 77 N.Y.2d at 522, 569 N.Y.S.2d at 336. The court also stated that "it is difficult to imagine words which could more clearly demonstrate the final expression of the parties' agreement then "WE HAVE BOUGHT FROM YOU ITL 537,750,000" and "WE HAVE SOLD TO YOU USD 250,000.00." Id. Finally, the court concluded that:
Where as here, the form and content of the confirmation slip suggest nothing other than that it was intended to be the final expression of the parties' agreement as to the terms set forth and where there is no evidence indicating that this was not so, U.C.C. 2-202 bars parol evidence of contradictory terms.
Schroder contends that since the confirmations at issue in the current case contain the same key language, the Court should similarly conclude that they were intended to be final expressions of the parties' agreement, barring parol evidence of contradictory terms.
The determination as to whether a writing was intended as a complete and exclusive statement of an agreement is a function of the court. See FMC Corp. v. Seal Tape Ltd., Inc., 90 Misc. 2d 1043, 396 N.Y.S.2d 993, 996 (1977) (citing Pennsylvania Gas Co. v. Secord Brothers, Inc., 73 Misc. 2d 1031, 343 N.Y.S.2d 256, aff'd., 44 A.D.2d 906, 357 N.Y.S.2d 702). In making this determination, the court is to measure the completeness of the written instrument itself, rather than the subjective attitude of the parties. Phillip Brothers, Etc. v. El Salto, S.A., 487 F. Supp. 91, 94 (S.D.N.Y. 1980).
While it is true that Schroder's confirmations contained the same key language relied upon by the court in Intershoe, and Schroder has produced evidence to indicate that each written confirmation stated the terms of a contract for the purchase and sale of currency, see Grez Tr., at 66; Geis Tr., at 128; Suttie Tr., at 65, 67; Seeley Tr., at 44, the Court finds that in this case, the confirmations cannot be deemed an integration intended as a final expression of the parties' agreement.
In Intershoe, which involved a single transaction, it was undisputed that the written confirmation was intended to reflect the individual transaction to which the parties had orally agreed. Indeed, Intershoe had unequivocally signified its acceptance of the terms set forth in the confirmation by signing and returning it to Bankers. In this case, by contrast, the confirmations were not intended to reflect the terms of the alleged overriding agreement pursuant to which in excess of one thousand transactions were conducted. Nor were they intended to reflect a single transaction to which both parties had orally agreed. Rather, each confirmation was intended to reflect the terms at which one of hundreds of currency conversions contemplated by the oral agreement had been completed. Grez Tr., at 195.
In addition, here there was no negotiation of the terms that were later set forth in the written confirmations, nor was there any prior agreement to the terms by CSAV. And whereas in Intershoe the parties specifically agreed to the terms that were confirmed in writing, in this case Schroder executed the currency conversions without prior input or agreement from CSAV, Geis Tr., at 154-58, 352-53; Grez Tr., at 48-49, 52-54; Suttie Tr., at 36-37, 43, 50-52, 98-99; Tygier Aff., at paras. 3, 4, 7, and then merely informed CSAV of the details of the transaction via the written confirmations.
Furthermore, it is undisputed that in this case CSAV never signed or otherwise assented to the written confirmations sent by Schroder. It is true that Schroder's written confirmations stated that "this confirmation is valid without signature," see Exhibit "D" to Def. Appendix, but the absence of CSAV's signature on the written confirmations further distinguishes this case from Intershoe and makes it impossible for the Court to determine, as a matter of law, that these confirmations were intended to be "the final expression of the parties' agreement as to the terms set forth." Intershoe, 77 N.Y.2d at 522, 569 N.Y.S.2d at 336.
Finally, the circumstances of the parties' longstanding relationship indicates that the confirmations should not be considered the complete and exclusive statement of the parties' agreement. The fact that Schroder set up accounts in Europe to accept CSAV's European currencies, and CSAV remitted its currencies exclusively to Schroder establish that the agreement between the parties had much more to it than was reflected in the confirmations sent to CSAV. As such, the Court finds that evidence of the oral agreement is not barred by the parol evidence rule.
Accordingly, the Court concludes that Schroder's motion for summary judgment on CSAV's breach of contract claim should be denied.
IV. Statute of Limitations
Because only CSAV's breach of contract claim remains, it is only necessary to discuss whether a portion of that claim is barred by the applicable statute of limitations as Schroder contends.
As a preliminary matter, the Court must determine when CSAV's action was commenced for purposes of the relevant statute of limitations. CSAV filed the instant action on November 9, 1990 and served Schroder on November 13, 1990. Since New York law provides that an action is commenced when the summons is served on the defendant,
CSAV's breach of contract claim was commenced on November 13, 1990. New York Civil Practice and Rules ("CPLR") § 203(b)(1) (McKinney 1972).
Article 2 of the U.C.C.
provides that an action for breach of contract must be brought within four years of its accrual. N.Y. U.C.C. § 2-725(1). Thus, CSAV's breach of contract claim is barred, as a matter of law, insofar as it alleges any breach occurring prior to November 13, 1986.
For the reasons set forth above, Schroder's motion, pursuant to Rule 56 of the Federal Rules of Civil Procedure, for an order granting it summary judgment is granted as to CSAV's common law fraud, RICO, and breach of fiduciary duty claims, and denied as to CSAV's breach of contract claim. However, CSAV's contract claim is barred by the applicable statute of limitations to the extent that it alleges any breach occurring prior to November 13, 1986.
SHIRLEY WOHL KRAM
UNITED STATES DISTRICT JUDGE
Dated: New York, New York
February 24, 1992