Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Union Bank, N.A. v. CBS Corp.

June 9, 2009

UNION BANK, N.A., PLAINTIFF,
v.
CBS CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Paul G. Gardephe, U.S.D.J.

MEMORANDUM DECISION AND ORDER

This action arises from a dispute concerning an investment account that CBS Corporation maintained at Union Bank, N.A.*fn1 (the "Bank"). The account was invested in the The Reserve Primary Fund ("Reserve Fund"), a money market fund that "broke the buck" as a result of losses sustained from holdings of Lehman Bros. debt securities. On September 15, 2008, CBS directed the Bank to liquidate its holdings in the Reserve Fund and to wire transfer the proceeds to its account at JPMorgan Chase ("Chase"). After receiving a communication from the Reserve Fund that day indicating that CBS's investment had been redeemed and that the proceeds would be forwarded to the Bank -- but before actual receipt of those proceeds -- the Bank wire transferred the full amount of CBS's Reserve Fund investment to CBS's Chase account. The Bank alleges that the Reserve Fund did not in fact wire transfer those proceeds to the Bank on September 15, 2008, and distributions from the Fund were subsequently frozen due to losses associated with the collapse of Lehman Bros. The Bank demanded that CBS repay it for the proceeds not received from the Reserve Fund, but CBS refused.

Before the Court is the Bank's motion for partial summary judgment on its breach of contract and U.C.C. claims (Counts I and II of the Complaint), and CBS's motion to dismiss the Bank's claims for conversion, money had and received, and unjust enrichment (Counts III, IV, and V of the Complaint). For the reasons set forth below, the Bank's motion for partial summary judgment is DENIED without prejudice, and CBS's motion to dismiss the Bank's money had and received and unjust enrichment claims is DENIED without prejudice to renewal in the form of a summary judgment motion. CBS's motion to dismiss the Bank's conversion claim is GRANTED.

I. Procedural History

The Bank's Complaint alleges five causes of action: (1) breach of contract; (2) a violation of N.Y. U.C.C. § 4-A-402 and Cal. Com. Code § 11402; (3) conversion; (4) money had and received; and (5) unjust enrichment. On November 3, 2008, CBS filed a motion to dismiss the conversion, money had and received, and unjust enrichment counts. On January 30, 2009, the Bank moved for partial summary judgment on the first and second counts relating to breach of contract and the U.C.C./California Code violations. The parties have not yet conducted discovery.

II. Facts

On April 29, 2008, CBS "opened the Union Bank account for the purpose of assisting CBS in its management of short term, high liquidity investments for its day-to-day cash needs." (Affidavit of Ken Woltersdorf dated January 21, 2009 ("Woltersdorf Aff."), ¶¶ 6, 11) The parties' banking relationship was governed by the following agreements: the Select Institutional Money Funds Account Agreement, and an addendum to that agreement (collectively "SIMFAA"); and the Master Funds Transfer Agreement, and an addendum to that agreement. (collectively "MFTA") (Bank. R. 56.1 Statement, ¶¶ 2, 3)*fn2 Under these agreements, CBS has the "sole responsibility for the investment, review, and management of all Property held in [the] Account" but the Bank has the authority to "to make or settle all purchases, sales, exchanges, investments and reinvestments of the Property held in [the] Account . . . upon receipt of, and pursuant to, [CBS's] instructions and according to the terms and conditions of this agreement. . . ." (Cmplt., Ex. A at § 2.1) The Reserve Fund was one of a number of funds offered by the Bank to CBS for investment through the account, and after opening its account, CBS "instructed Union Bank that its funds should be directed to investment in [the Reserve Fund]." (Woltersdorf Aff., ¶ 12) "Over the history of the account, CBS . . . cumulatively invested and withdrew more than $330 million." (Id., ¶ 13)

The events giving rise to this action began on September 11, 2008, when Ken Woltersdorf, a CBS employee, sent an email to Bank employee Cathy Yoell, stating: "I just want to alert you that we expect to make a full redemption from the [Reserve Fund] on 9/15/08 due to significant disbursements expected on that date." (Woltersdorf Aff., Ex. A5) On September 15, 2008, Woltersdorf called the Bank and told Bank employee Ed Yee that "CBS was instructing Union Bank to make a full redemption of its interest in the [Reserve Fund] shares Union Bank held on its behalf and to withdraw the proceeds of that redemption, as [Woltersdorf] had indicated on September 11." (Id., ¶ 16) Woltersdorf also instructed Yee "to wire the proceeds of that transaction to CBS." (Id.)

At 10:09 a.m. PT on September 15, 2008, Yoell sent an email to Woltersdorf stating: "The sale of $72,268,078.21 [R]eserve Primary Liquidity II has been completed Order#663444; included with the principal will be the interest of $77,404.08 as well." (Woltersdorf Aff., Ex. A6) At 10:45 a.m. PT, the Bank initiated a wire transfer of $72,345,482.29 to CBS's account at Chase. (Bank. R. 56.1 Statement, ¶ 24; CBS R. 56.1 Statement, ¶ 24) The wire transfer was received by Chase at 11:12 a.m. PT on September 15, 2008. (Id., ¶ 26) CBS alleges that it then used the $72,345,482.29 that the Bank had wired to pay a portion of more than "$200 million in operating expenses and other disbursements on September 15." (Woltersdorf Aff., ¶ 22) "The Reserve Fund [, however,] did not deposit the proceeds of CBS's redemption order with Union Bank on September 15, 2008."*fn3 (Bank R. 56.1 Statement, ¶ 29) "On September 16, [t]he Reserve [Fund] announced that as of 4:00 p.m. [ET] . . . on September 16, the net asset value ('NAV') for the Primary Fund would be $.097 per share, rather than the historically maintained NAV of $1.00 per share." (Woltersdorf Aff., ¶ 23 (citing Ex. A7)). On September 22, 2008, the Securities and Exchange Commission issued an order suspending all rights of redemption from the Reserve Fund. (Woltersdorf Aff., Ex. A9) After the Reserve Fund allegedly failed to forward the proceeds of CBS's investment to the Bank, the Bank demanded that CBS repay the Bank for its "advance" of funds. (Id., ¶¶ 26, 27) CBS refused.*fn4 (Bank R. 56.1 Statement, ¶ 36)

Since that time, the Reserve Fund has made partial distributions from customer accounts. For example, on October 31, 2008, the Reserve Fund distributed approximately 50% of the account balance of its customers' investments in the Reserve Fund, and on December 3, 2008, the Reserve Fund distributed approximately 57% of the then remaining account balance of its customers' investments in the Reserve Fund. (Affidavit of Marianne Bamonte dated Dec. 12, 2008, Ex. 6) The Bank asserts that as of the date of its motion, the Reserve Fund has distributed $57,040,069.90 to the Bank, but $15,305,412.39 has not yet been paid out.*fn5 (Bank R. 56.1 Statement, ¶¶ 33, 34)

III. Union Bank's Motion for Partial Summary Judgment Will Be Denied Without Prejudice

Union Bank argues that it is entitled to summary judgment on its breach of contract and UCC claims because the parties' agreements unambiguously require CBS to repay any funds the Bank advances to CBS as an overdraft on CBS's account. The Bank relies on language from the MFTA providing:

If you do not have sufficient funds available in your account(s) with us, we may, but are not required to complete fund transfers you request. In such cases, you agree to repay us immediately the amount of any overdraft and for any related fees. (Cmplt., Ex. B)

The Bank also cites the following language from the SIMFAA:

Bank is authorized to charge the Client . . . for the funds necessary for Bank to complete any purchase or expense, to make any directed disbursement or to take any other action regarding the Account. . . . Client will pay back any fees or costs incurred . . . if ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.