The opinion of the court was delivered by: WILLIAM C. CONNER
State Street Bank and Trust Company (State Street) brings this action against The Mutual Life Insurance Company of New York (MONY) for breach of contract, fraud, negligent misrepresentation, conversion, and various state statutory violations.
The matter is before this Court on the parties' cross motions for summary judgment. Defendant moves for summary judgment on all the claims, while plaintiff moves for summary judgment on the breach of contract and one of the state law statutory claims. Plaintiff's motion is denied in all respects. Defendant's motion is denied as to the contract and conversion claims, denied in part as to the state statutory claims, and granted as to the fraud and negligent misrepresentation claims.
State Street is a financial institution which provides various investment services for employee benefit plans throughout the country. MONY is an insurance company which offers investment contracts to such plans. In mid 1990, State Street solicited bids for Guaranteed Investment Contracts (GICs) and MONY submitted its GIC bid in conformity with State Street's bid specifications. Gaffney Pep. at 47-48; Bevis Pep. at 20. In July and October of 1990, State Street, as trustee for four employee retirement plans, contracted with MONY for the purchase of four GICs. Under the contracts, State Street deposited various sums with MONY and MONY guaranteed a fixed rate of return on those deposits for a specified term.
All the GICs in question contain identical withdrawal provisions. The contracts allow State Street, upon 90 days notice, to withdraw the funds from the GICs before the expiration of the term subject to an early withdrawal penalty calculated by means of a Market Value Adjustment (MVA) formula. Contracts 2.3(a). The objective of the MVA formula is outlined in the contract, but the precise derivation and calculation of the formula is left to MONY's discretion. Id. The GICs also require MONY to provide State Street with a written copy of the MVA formula. Id.
The parties' reciprocal performances on the GICs progressed without incident until July 19, 1991 when Moody's reduced MONY's credit rating from Aa2 to Baa1. Katz Dep. at 172. Soon after the downgrade, officers of State Street began discussing the possibility of terminating the GICs. Gaffney at 110-15. On July 22, 1991, in connection with this review, State Street requested and was sent a copy of the then applicable MVA formula. Gaffney at 84-85. As confirmed by subsequent letters, the original MVA formula, calculated on the basis of market conditions prevailing at the time, resulted in almost no penalty for early withdrawal.
The following week State Street submitted its notice to withdraw all funds held in the GICs.
During the 90 days between notice and withdrawal, MONY revised the MVA formula so that the penalty for early withdrawal increased to between 3.3% and 6% of the book value of the GICs. State Street received a written statement of the revised formula on October 23, 1991. Golden Decl. in Supp. P 11; Suppl. Reid Certif. Ex. 2. The contracts were paid pursuant to this revised MVA formula.
State Street brings this action to recover the early withdrawal penalties, totaling $ 697,145, which were levied against it pursuant to the revised MVA formula.
Summary judgment is granted only when, after drawing all reasonable inferences in favor of the party opposing the motion, no reasonable trier of fact could find for the nonmoving party. Lund's, Inc. v. Chemical Bank, 870 F.2d 840, 844 (2d Cir. 1989). A summary judgment is not appropriate where material factual matters are in dispute. National Union Fire Ins. Co. v. Turtur, 892 F.2d 199, 203 (2d Cir. 1989). The breach of contract, conversion, and Massachusetts unfair business practice claims in the case at bar raise factual issues that require the denial of summary judgment. However defendant's motion for summary judgment on the fraud, negligent misrepresentation, and other state statutory claims is granted.
I. The Cross Motions for Summary Judgment on the Contract Claim
Both parties move for summary judgment on the contract claim. However, all the theories which the parties claim support their respective motions are either legally inadequate or require the Court to make a determination of disputed facts. Therefore, the motions for summary judgment on the contract claim are denied.
The relevant contracts provide:
2.3 Withdrawals from the general Investment Accumulation Fund shall be made in accordance with the following provisions:
(a) At any time prior to the Interest Expiry Date, the contractholder may, by giving MONY at least 90 days advanced written notice, withdraw the balance in the General Investment Accumulation Fund. However, before making any such withdrawal for payment to the Contractholder, MONY shall have the right to withdraw from the General Investment Accumulation Fund (i) the amount it determines to be appropriate in order to recognize the excess, if any, of the earnings rate allocable to funds currently being invested over the earnings rate allocable to the funds being released . . .
MONY shall provide the Contractholder with a written statement as to the terms, conditions and assumptions used in determining the amount to be withdrawn pursuant to clause (i) ...