release referred to claims "arising out of" the SPA. The Gulf and CRL releases referred to "all claims . . . liabilities, duties, debts, and obligations owed or alleged to be owed . . . as [of] 30 September 1991 or in respect of any period ended on or prior to that date . . ."
Nycal characterizes the difference between these releases as "striking" and reflective of the parties' intention to craft only a limited release between Nycal and Inoco.
The difference in language employed, however, simply does not support this conclusion. Any difference is a logical consequence of the different relationships and dealings between the respective companies. The relationship between Inoco and Nycal, unlike that between Inoco and Gulf and CRL, was limited to the SPA and matters arising therefrom. It is unremarkable, then, to find that the Nycal-Inoco language spoke specifically in terms of the SPA, whereas the other releases, drawn against the context of more extensive connections between the parties, spoke in less specific terms.
In any case, Nycal's argument on this point would prove too little. At most, it would demonstrate that something less than a general release was granted. But it would not follow from this that the language "arising out of the SPA" does not include a claim of fraudulent inducement of the SPA. In other words, however limited the Settlement Agreement release might be, at least some claims relating to the SPA necessarily were released; the contrast highlighted by Nycal does not suggest that claims of fraudulent inducement of the SPA are not within the group of precluded claims.
Nor is there any evidence supporting Nycal's far more restricted view that the Settlement Agreement was meant "only to resolve the Inoco suit on the stopped check, and Nycal's claims for breach of warranties and representations in connection with the Gulf-Pac loan."
This exceedingly narrow interpretation does not square with the plain language of the release. More significantly, the Court previously has observed that "the fact that the Settlement Agreement disposed of a controversy in which plaintiff asserted a fraudulent inducement claim suggests that the waiver in that document is properly construed as reaching beyond claims for breach of contract."
The Settlement Agreement disposed of more than the two discrete matters insisted upon by Nycal. It disposed also of at least one controversy involving a claim of fraudulent inducement. In light of the fact that the Settlement Agreement released "any such claim as may now exist or as may arise after the date hereof," it therefore follows that all fraudulent inducement claims concerning the SPA were released. Nycal has come forward with no admissible evidence supporting a contrary conclusion. The unrebutted extrinsic evidence of the parties' objective manifestations of intent thus leads inexorably to the conclusion that the Settlement Agreement released all claims relating to the SPA, including claims for fraudulent inducement.
II. Fraudulent Inducement of the Settlement Agreement
Nycal seeks to avoid the Settlement Agreement's preclusive impact on its claim of fraudulent inducement into the SPA by asserting that the Settlement Agreement too was fraudulently induced. In support, Nycal claims that the Settlement Agreement "was the product of fraudulent misrepresentations and omissions, specifically the failure of Inoco to inform Nycal that Inoco had diverted NZ $ 5,000,000 of the purchase price of Unisys House, in New Zealand, from the seller Citibank to accounts used for Inoco's benefit at Interallianz Bank in Switzerland. [Also known as the 'New Zealand frauds.']"
This claim previously was the subject of a motion to dismiss for failure to plead with particularity as required by FED.R.CIV.P. 9(b).
In Nycal II, the Court held that Nycal adequately had pled its claim of fraudulent inducement into the Settlement Agreement in light of the specific allegations contained in Nycal's motion papers.
Those papers asserted that Nycal believed that it was aware of all "material frauds or other improprieties" at the time it entered into the Settlement Agreement in October 1991, but in fact was unaware of the so-called "New Zealand frauds" until March 1993.
Nycal asserts that it now has come forward with evidence in support of these allegations, in the form of Mr. Horn's declaration and that this renders summary judgment inappropriate.
At first blush, the argument has some appeal. There has been an important development in this case since the motion to dismiss was considered, however. The Court has concluded that the Settlement Agreement extends to claims of fraudulent inducement. This presents a significant new problem for Nycal, because "a plaintiff who has settled a claim for fraud may not subsequently assert that he or she is not bound by the settlement because the extent of the fraud was not fully disclosed."
The Second Circuit's decision in Bellefonte Re Ins. Co. v. Argonaut Ins. Co.56 is instructive. Bellefonte addressed an attempt by two companies to rescind their reinsurance contracts and settlement agreements with Argonaut on the ground that Argonaut had withheld material information concerning its relationship with a third company acting in Argonaut's name.
The plaintiffs argued that they could not be bound by the settlement of their fraud claims because the scope of the fraud had not been disclosed fully.
This argument was rejected by the Second Circuit as clearly contrary to the rule of Alleghany Corp. v. Kirby,59 in which the Circuit refused to allow a corporation to escape the preclusive effect of its settlement of an earlier suit in which some, but not all, aspects of the underlying fraud had been revealed during the settlement's negotiation.
The Bellefonte plaintiffs attempted to distinguish Alleghany, but the Circuit concluded that the authorities upon which the plaintiffs relied
"involved circumstances in which the settlement or release had been part of the very transaction attacked as fraudulently induced, or other circumstances in which it was clear that no semblance of a fraud claim had come to light before the claim at issue was settled and it was clear that the parties had not intended to settle fraud claims. "