The opinion of the court was delivered by: ALVIN HELLERSTEIN, District Judge
OPINION AND ORDER DENYING RECONSIDERATION, AND ON DAMAGES
In my Opinion and Order dated July 1, 2003 ("Opinion"), I
granted summary judgment to defendant Morgan Guaranty Trust
Company of New York ("Morgan") dismissing counts one, two, three,
five, and six of plaintiffs' Second Amended Complaint. I granted
summary judgment to plaintiffs Korea Life Insurance Co., Ltd.
("KLI") and Morning Glory Investment (L) Limited ("Morning
Glory") on count four, alleging breach of contract against
Morgan. Korea Life Ins. Co. v. Morgan Guar. Trust Co. of N.Y.,
269 F. Supp. 2d 424, 447 (S.D.N.Y. 2003). I deferred ruling on
damages, pending further submissions from the parties and further
proceedings. Id. at 447-48.
Both parties filed motions regarding damages, and Morgan also
filed a motion for reconsideration. I held oral argument on
February 4, 2004, and the parties filed supplemental briefs on
damages subsequent to the argument. I now rule on all outstanding
issues, denying Morgan's motion for reconsideration, denying
Morgan's defense regarding mitigation, and finding Morgan liable
for damages pursuant to its breach of contract in the amounts
stated below. I also deny as moot plaintiffs' motion to strike the expert
reports of Michael R. Darby and Robert Pickel.
The complex factual background is treated extensively in my
prior opinion. See Opinion at 1-16; 269 F. Supp. 2d at 426-35.
I assume familiarity with that opinion and restate the facts here
only to the extent germane to this discussion.
Morgan moved for reconsideration in response to my invitation.
My original decision granted relief to both sides, even though
only Morgan had moved for summary judgment. I granted summary
judgment to plaintiffs for breach of contract on the ground that
the district judge should search the record in deciding a motion
for summary judgment and give judgment as appropriate, even
though the party who turns out to win may not have made the
motion itself. See Opinion at 37; 269 F. Supp. 2d at 446.
However, I was concerned that the record was so extensive that I
may have overlooked facts, or that a party may not have felt the
need to present all relevant facts and arguments. I therefore
invited further submissions to correct any overlooked or
unpresented facts or arguments, as well as on the issues of
damages. See Tr. Feb. 4, 2004, at 2-3.
In moving for reconsideration, Morgan makes two primary
arguments. The first is that there is no admissible evidence that
written notice was ever provided to Morgan, rather than to Korea
Exchange Bank ("KEB"), and that written notice to Morgan was
contractually required. The second is that several contemporary
documents written by KLI's Bo-Chan Kim in September and October
1997 do not mention KLI's demand to unwind, and Kim's
contemporary silence suggests that his October 16, 1997 demand was not really
intended. I consider and reject both of Morgan's arguments.
A. Written Notice to Morgan
As I held in my opinion, see Opinion at 9;
269 F. Supp. 2d at 431, the Total Return Swap Agreements between Morning
Glory and KEB, and between KEB and Morgan, incorporated the ISDA Master
Agreement, requiring all notices to be in writing. Accordingly,
it was the October 16, 1997 written unwind request, rather than
the prior oral communications, which constituted legally
effective demand on Morgan, obligating it to unwind the
transactions. Morgan's refusal to act constituted a breach of its
contract obligations. Opinion at 37;
269 F. Supp. 2d at 446.*fn1
Morgan asserts that I should grant reconsideration because it,
and not only KEB, should have been given written notice of KLI's
instruction to unwind the transactions. According to Morgan, the
testimony of KLI's Bo-Chan Kim, who sent the October 16, 1997
demand to unwind and then telephoned KEB and Morgan to confirm
its receipt, is hearsay and inadmissible, and that is the only
evidence that Morgan was informed of the written notice.
To elaborate on what I described in my earlier opinion, see
Opinion at 15, 31; 269 F. Supp. 2d at 434, 443, the record shows
that KLI first demanded an unwind as early as June 1997,
directing its requests both to Morgan and to KEB as intermediary.
KEB and Morgan both declined to act. At a meeting at KLI's office
in August 1997, Dr. Chang Hyun Chi, the head of Morgan's Korea
team, acknowledged to Kim, a manager in KLI's Fixed Income
Department, that Morgan had received, but had not executed, KLI's
demand to unwind. Kim reiterated to Chi KLI's demand to unwind, but Morgan still did not comply.
Ultimately, on Morgan's specific instructions, KLI sent its
written demand to KEB on October 16, 1997, in the form of a
telefax from Kim to Joongseok Ahn, a General Manager of KEB.
After sending the telefax, Kim called KEB to confirm its receipt
of KLI's telefax, in accordance with the regular business
practice in Korea, and KEB acknowledged to Kim that it had
received KLI's demand notice. A week later, Kim called both KEB
and Morgan to inquire why the unwind had not yet been executed.
Both KEB and Morgan told Kim that they would not unwind the
transaction, each stating that it could not act without the
assent of the other, but neither giving the other its assent.
The record that establishes these facts is drawn primarily from
testimony by Kim, and confirmed in testimony by other KLI and
Morgan employees having personal knowledge, including Chae Wook
Noh, the General Manager of KLI's Stock Department who had
principally brokered the deal. Taped telephone conversations
among Morgan employees confirm that Morgan knew of, and that it
intentionally ignored, KLI's attempts to make further contact.
The relevant testimony by Kim, aside from deposition testimony,
was at an evidentiary hearing which I conducted on September 4-5,
2002. Kim testified that he sent the fax on the instructions of
the Morgan representative whom he spoke with, either Dr. Chang
Hyun Chi or General Manager Sung Woo Park. Tr. Sept. 5, 2002, at
174-75. "Before we sent out this particular instruction, we made
several calls in order to unwind in order to request unwinding
of a thai baht, but that was not done. . . . Dr. Chi said that we
have to send out instruction to KEB . . . What he said was that
if we sent this instruction to KEB, KEB will relay this document
to J.P. Morgan and then J.P. Morgan will quote the price and if
we accept the price, then deal can be settled." Id. at 175-77;
see also id. at 169 ("We sent this document because J.P.
Morgan asked us to send."). Kim authenticated a translation and the
original of the telefax which he had sent, which were received as
Plaintiffs' Exhibits 15 and 16, respectively.
Morgan did not object to the admission of the original
document, Exhibit 16, on grounds of authenticity, but objected on
grounds of late production and on the grounds that a foundation
was not laid for its receipt by KEB. Id. at 164-65. I inquired
of Kim as to the regular business practice in Korea, and he
explained that the legend which in the United States customarily
appears at the top of a faxed document to confirm its receipt is
not printed in Korea. Instead, the sender customarily telephones
the recipient to confirm the document's receipt. Kim testified
that he followed the customary practice in this case, speaking to
either KEB General Manager Joongseok Ahn or his deputy, Yong Il
Keum. Id. at 165-66. Morgan did not raise any objections during
the course of my questioning, id., and on the basis of this
testimony, I overruled Morgan's objection and admitted the
document into evidence. Id. at 167.
Kim testified that he called KEB to confirm its receipt of his
telefax, see id. at 166, and that he called Morgan the
following week to inquire why the unwind had not occurred. His
most detailed explanation followed at the end of his redirect
examination, when I questioned him directly:
THE COURT: What happened after you sent Exhibit 16?
THE WITNESS: After we sent out this document, we
still did not receive any response from J.P. Morgan.
So after one week we called J.P. Morgan once again.
I'm not sure whether the person who answered my call
was Dr. Chi or Mr. Sung Woo Park.
When I asked why the order was not implemented, why
they didn't give us the price quote, J.P. Morgan
answered that they did not receive this document from
KEB. So after I hung up the phone, I called Mr. Keum
When I asked Mr. [Keum] why this instructional
document was not released to J.P. Morgan, Mr. Keum
answered that he did relay this document to J.P.
Morgan but he said that . . . he was under the
impression that J.P. Morgan was not interested in
implementing the order.
I was very nervous about what happened, so I called
J.P. Morgan once again. THE COURT: Before you do that, you testified that Mr.
[Keum] at KEB said that it was his impression that
Morgan wasn't interested. Did he say why he had that
MR. HUMMEL [counsel for Morgan]: Your Honor, may I
object to the hearsay?
THE COURT: Overruled.
MR. HUMMEL: And I move to strike the hearsay.
THE WITNESS: Mr. Keum said that J.P. Morgan was
trying to make excuses, but I didn't really ask why
Mr. Keum formulated such an impression about J.P.
Morgan because I was really angry and I just wanted
to speak to J.P. Morgan once again to find out why.
So I called.
THE COURT: See if you can give me a date for this
next call to Morgan.
THE WITNESS: I made all these calls one week after we
sent out this document and several calls were made on
the same day after sending out this document. And
when I spoke to J.P. Morgan, they told me something
opposite to what KEB told me, had told me earlier,
saying that J.P. Morgan said that it is KEB who
seemed to be not interested in unwinding the thai
. . .
I was very much angry at the time and . . . I really
was under the impression that KEB and J.P. Morgan
[were] playing with KLI.
Id. at 177-79. The only hearsay objection that Morgan made to
any of Kim's testimony was the objection, quoted above, to Kim's
testimony regarding the basis for Keum's "impression that J.P.
Morgan was not interested in implementing the order." Id. at
178. Morgan now objects to Kim's entire testimony on the grounds
that it was hearsay. I note first that Morgan's objection was not
timely made, and Morgan in no way indicated that its objection
applied to any previous part of Kim's testimony. Morgan did not
object during Kim's direct examination, for instance, when he
testified that he called KEB to confirm receipt of the telefax.
Id. at 165-67. Nor did Morgan object earlier in Kim's redirect
examination, when he testified that he informed Morgan that he
had sent the unwind demand to KEB. Id. at 173. As applied to
these aspects of Kim's testimony, Morgan's objection was not
timely made and therefore is waived. See Fed.R. Evid.
103(a)(1) (admission of evidence is not error unless "a timely
objection or motion to strike appears of record"); United States
v. Frustaci, 96 Cr. 430, 1997 U.S. Dist. Lexis 14111 (S.D.N.Y.
Sept. 16, 1997) (objection sustained where not timely made). Even if Morgan's objection is understood broadly to refer to
the entirety of Kim's testimony, and even if it were deemed
timely, it could not properly be sustained as applied to other
aspects of Kim's testimony beyond his testimony regarding Keum's
impression that J.P. Morgan was not interested in implementing
the order. Fed.R. Evid. 801(c) defines hearsay as "a statement,
other than one made by the declarant while testifying at the
trial or hearing, offered in evidence to prove the truth of the
matter asserted." Kim's testimony that he called KEB and Morgan
to check that the unwind demand was received and would be acted
upon was not hearsay, since Kim made the statements himself,
regarding his own previous activities. See Fed.R. Evid. 801(c)
(defining hearsay as a statement "other than one made by the
declarant while testifying at the . . . hearing"); cf. United
States v. Yousef, 327 F.3d 56
, 153 (2d Cir. 2003) (defendant's
prior written statement is hearsay but his testimony is
admissible under Fed.R. Evid. 801(c)). Kim's testimony regarding
the course of phone calls following a telefax was also not
hearsay, for this testimony was offered not "to prove the truth
of the matter asserted," but to establish the regular business
practice in Korea. The testimony was not offered in the context
of direct questioning, but in the context of investigating the
reliability of Plaintiffs' Exhibit 16.
I provided Morgan with ample opportunity to supplement the
record with its own evidence, through testimony or otherwise,
that it and KEB had not received notice of KLI's October 16, 1997
telefax. Both on and off the record, at conferences, during the
evidentiary hearings on Morgan's summary judgment motion, and
during this motion for reconsideration, I pressed the parties to
submit any other relevant evidence which would provide a more
complete record. See, e.g., Tr. Sept. 4, 2002, at 3, 107-08,
117-18; Tr. Sept. 5, 2002, at 183; Tr. July 17, 2003, at 13-14;
Tr. Feb. 4, 2004, at 2-3. Morgan did not produce any evidence
contradicting Kim's testimony; instead, Morgan rests on its
denials. Morgan "must do more than simply show that there is some metaphysical doubt as to the material facts"
in order to raise a triable issue of fact. Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).
Morgan's simple denial is even less persuasive in the context of
a motion for reconsideration. See Kotlicky v. United States
Fidelity Guar. Co., 817 F.2d 6, 9 (2d Cir. 1987) (heightened
standards for motion to reconsider); Nemaizer v. Baker,
793 F.2d 58, 61-62 (2d Cir. 1986) (same).
Aside from disputing the evidence showing that KEB and Morgan
were made aware of KLI's October 16, 1997 unwind demand, Morgan
also contends that the unwind demand was legally defective
because the requirement of written notice included a requirement
that the written notice be sent, not to KEB, but to Morgan
directly. As I held before, Morgan "knew, by reason of both KLI's
written and oral notices, that KLI wanted its baht position
unwound, and that it was Morgan's decision not to comply with the
demand Clearly, Morgan had actual knowledge, and therefore is
deemed to have notice that KLI made demand pursuant to the unwind
provision." Opinion at 32; 269 F. Supp. 2d at 443 (citing
Leasing Serv. Corp. v. Diamond Timber, Inc., 559 F. Supp. 972,
978 (S.D.N.Y. 1983)). Morgan thus had actual knowledge of the
written notice. "A person is deemed to have notice when he has
actual knowledge or when `from all the facts and circumstances
known to him at the time in question he has reason to know that
it exists.'" Pavia v. 1120 Ave. of the Americas Assocs.,
901 F. Supp. 620, 625 (S.D.N.Y. 1995) (quoting Diamond Timber,
559 F. Supp. at 978).
More significantly, it was Morgan which had "instructed KLI to
send any request to unwind to KEB." Opinion at 15;
269 F. Supp. 2d at 431. Indeed, Morgan maintained that position that any
notice was to be sent to KEB right up through its motion for
summary judgment. See Memorandum in Support of Defendant's
Motion for Summary Judgment at 35-36 (April 12, 2002) ("Morning
Glory did have an express contractual right under the Morning Glory-KEB Swap to `terminate' that contract upon two days written
notice to KEB." (emphasis original; citing clause establishing
privity between Morning Glory and KEB)); Tr. June 20, 2002, at
62-63 ("The contracts provide that there should be a demand, that
it should be to KEB . . ."); Tr. Sept. 5, 2002, at 171 ("The
unwind request should have been to KEB . . ."). After
consistently maintaining the position that KLI and Morning Glory
were required to give written notice to KEB, Morgan is now
estopped from arguing that the written notice should have been to
Morgan instead. See, e.g., Club Haven Investment Co. v.
Capital Co. of America, 160 F. Supp. 2d 590 (S.D.N.Y. 2001)
(equitable estoppel doctrine binds a party to its word in breach
of contract case).
Morgan held out KEB as its agent for receiving notice. It
rejected KLI's initial attempts to communicate directly to Morgan
its desire to unwind, instructing KLI that an unwind demand would
be considered effective only if it was sent, in writing, to KEB.
It maintained that position throughout this lawsuit. Morgan's
actions now are governed by the rule that a party which gives
instructions as to the recipient to whom notice must be provided
may not later contend that notice given to that recipient was
ineffective. "[K]knowledge acquired by an agent acting within the
scope of his agency is imputed to his principal and the latter is
bound by such knowledge although the information is never
actually communicated to it." Center v. Hampton ...