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May 7, 1998


The opinion of the court was delivered by: KAPLAN


 LEWIS A. KAPLAN, District Judge.

 Nahum Manela, Roseane Manela, and Eva Goldman here sue Garantia Banking Limited ("GBL") and Garantia, Inc. ("GI") to recover in excess of $ 20 million in damages as a result of defendants' sales and purchases of plaintiffs' securities. The case is now before the Court on defendants' motion for summary judgment.


 The Parties

 Plaintiff Nahum Manela ("Manela") is the founder, former president, and controlling shareholder of DeMillus, a large Brazilian manufacturer of women's undergarments. *fn1" Plaintiffs Rosane Manela and Eva Goldman are his daughter and niece, respectively. *fn2"

 GBL is a Bahamian company with its principal place of business in Sao Paulo, Brazil, *fn3" and GI is a Delaware corporation with its principal place of business in New York City. *fn4" GBL, which has no employees or office of its own, is a wholly-owned subsidiary of Banco de Investimentos Garantia, S.A. ("BIG"), Brazil's largest investment bank, and pays BIG an annual fee for the services of some 25 BIG employees in Sao Paulo who conduct an investment banking business with GBL's clients. *fn5" GI is an indirect wholly-owned subsidiary of BIG and a registered broker-dealer under the Securities Exchange Act of 1934. *fn6"

 Manela's Relationship With Defendants

 As the facts and the contentions of the parties are outlined in the Court's previous opinion, *fn7" the Court will confine itself here to a summary of the events of immediate significance to defendants' motion.

 At the suggestion of a GI employee named Marcello Stallone, Manela opened a margin trading account with GBL in August 1994 for the purpose of trading in Brazilian Brady bonds. *fn8" Rosane Manela and Eva Goldman signed the account application as "Joint Account Holders." *fn9" Manela deposited his existing investment in Brady bonds, *fn10" which had a face value of $ 16 million, into his GBL account with the intention of increasing his Brady bond position. *fn11" He borrowed against the bonds and other collateral on deposit with GBL to finance further purchases. *fn12"

 At the time of the first loan and again with each subsequent loan, GBL sent a form agreement to Manela (the "Loan Agreements") *fn13" although none of these Loan Agreements ever was signed by the plaintiffs. *fn14" The Loan Agreements provided that GBL would finance 70 percent of the bonds' purchase price, with the bonds themselves serving as collateral. *fn15" The margin provisions of the Loan Agreements provided that if the ratio of the loan amount to the market value of the Brady bond collateral exceeded 80 and later 85 percent, plaintiffs would be required to deposit additional collateral or prepay part of the loan so that the ratio would be restored to 70 percent. *fn16" The term of each loan, according to the Loan Agreements, was one month, *fn17" although plaintiffs contend that the parties intended that the loans be renewed to permit plaintiffs to hold the bonds as long as Manela desired. *fn18" The loans in fact were renewed monthly during 1994 and part of 1995. *fn19"

 Manela had a significant investment also in a GBL-managed fund entitled the Garantia Debt Fund ("GDF"). *fn20" Manela alleges that he made this investment at the urging of Stallone, who purportedly told Manela that the GDF investment could be used "like cash" to deal with any margin call. *fn21"

 By December 1994, Manela held Brady bonds with a face value of approximately $ 270 million. *fn22" At that time, however, the market for Brady bonds was in turmoil due to the Mexican peso crisis that began in late December 1994. *fn23" On January 9, 1995, the market value of these Brady bonds fell to a point at which the ratio of the loan amounts to the market value of the collateral exceeded 85 percent. *fn24" Defendants contend that the ratio exceeded 90 percent on January 10. *fn25" In response, GBL, without immediately notifying Manela, extended credit against Manela's investment in the GDF, in order to reduce the ratio, to the extent of over half the value of his GDF holdings. *fn26" According to defendants, this succeeded in lowering the ratio only to 79.28 percent. *fn27"

 The Sales on January 11, 1995

 At 8:00 a.m. on January 11, Stallone contacted Manela and informed him that the market value of his Brady bonds had fallen to a point at which the value of his collateral was below the stipulated ratio. *fn28" He told Manela that Manela therefore would have to make a deposit to prepay a portion of the loans, failing which GBL would sell a portion of Manela's collateral in order to reduce the ratio to 70 percent. *fn29"

 Manela expressed disbelief that a margin call had occurred at the then current market price of Brady bonds and refused to authorize Stallone to sell his bonds to meet the margin call. *fn30" He did suggest, however, that the GDF investment be used if necessary to meet the margin call -- which prompted disclosure of the fact that GBL already had extended credit against the GDF investment for Manela's account on the previous day. *fn31" Finally, Manela asked Stallone to delay the liquidation of any collateral while Manela checked with Republic National Bank ("RNB") in Zurich to determine whether he could liquidate other holdings. *fn32" A short time later, Manela called Stallone back and told him that it would take several days to liquidate other holdings. *fn33" He asserts also that he obtained Stallone's promise that any liquidation of Manela's collateral would be done slowly, in small tranches. *fn34"

 At approximately 9:00 a.m., Stallone called Manela again and informed him that GBL had sold $ 45 million face value of Manela's Brady bonds at an average price of 35.5 percent. *fn35" Stallone later revised this statement to indicate that $ 50 million face value of bonds had been sold. *fn36"

 The January 12, 1995 Purchase

 At 9:00 a.m. the next morning, Stallone called Manela to report that Brady bond values had risen to 40.5 percent. *fn37" The resulting increase in the value of Manela's position meant that he again was able to make financed purchases of Brady bonds, and he instructed Stallone to replenish his position to the maximum extent possible. *fn38" Stallone argued against doing so, at least initially. *fn39" Manela responded that he had made up his mind to buy. *fn40" Stallone then reported that he had located a block of Brady bonds with a face value of $ 40 million and that the price for this block was 43.25 percent. *fn41" Although he was surprised by this price, Manela instructed Stallone to purchase the block. *fn42"

 Manela claims that he was unaware at that time that the block was being sold to him out of GBL's own holdings. *fn43" Stallone claims that he disclosed GBL's ownership at the time. *fn44"

 Subsequent Events

 Manela received written confirmation of the January 11 sale of his bonds approximately one week later. *fn45" Prior to this instance, Manela asserts, confirmations always had been issued the day after a transaction took place. *fn46"

 By January 19, Manela was concerned that the loan to value ratio in fact had not exceeded 85 percent on January 11. *fn47" On January 27, Manela wrote a letter to GBL's president, Claudio Haddad, protesting the January 11 sale. *fn48" Haddad responded by asserting that Manela had consented to the January 11 sale. *fn49" Manela contends also that Haddad told him that he must repay the entire amount of his outstanding loans, in the approximate amount of $ 100 million, by the next day or that GBL would liquidate his holdings. *fn50" According to defendants, approximately $ 102 million in loans from GBL to Manela became due and owing on February 1, 1995. *fn51"

 The parties met to address Manela's complaints on February 8, 1995 at BIG's Sao Paolo headquarters. GBL was represented by Haddad. BIG was represented by Reynaldo Figueiredo, head of BIG's private banking group, and Mario Cesare de Andrade, whom Manela described as a partner in BIG and Figueiredo described as an attorney employed by BIG. Stallone attended the meeting as well. *fn52" According to Manela, Haddad had stated in a previous phone call that GBL would not rescind the January 11 sale and, further, that GBL would call Manela's loans and sell his collateral unless Manela released all claims he might have against GBL arising out of the January 11 sale. *fn53" At the February 8 meeting, defendants presented Manela with a release and demanded that he sign, failing which they would withdraw financing. *fn54" Manela did not execute the release. *fn55"

 On March 8, 1995, Manela received a fax from GBL warning that GBL would sell his bonds by March 15, 1995 to pay off his allegedly overdue loans unless Manela repaid all indebtedness prior to that date or transferred his account to another institution. *fn56" Manela asserts that, despite the March 15 deadline, GBL proceeded to sell off approximately $ 65 million in face value of his bonds between March 8 and March 10 without his consent. *fn57" Manela subsequently transferred his remaining holdings, consisting of $ 225 million in face value of Brady bonds, to Morgan Stanley, which then liquidated $ 71 ...

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