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In re Actrade Financial Technologies

September 11, 2012


The opinion of the court was delivered by: Richard M. Berman, U.S.D.J.


I. Background

Before the Court is a motion, filed on April 4, 2012 by the Actrade Liquidation Trust ("Trust") pursuant to Rule 56 of the Federal Rules of Civil Procedure, seeking summary judgment on certain counterclaims filed against the Trust on August 2, 2011 by Deloitte & Touche LLP ("Deloitte"). The counterclaims include breach of contract, promissory estoppel, and declaratory relief. (See Deloitte's Countercls., Answer & Defenses, dated Aug. 2, 2011.) The Trust argues, among other things, that (1) the parol evidence rule bars admission of an alleged oral "collateral agreement" entered into between the Trust and the lead plaintiffs in the underlying securities action ("Lead Plaintiffs") in or around August 2010 ("Trust Release Agreement"), in which the Trust allegedly agreed to release its claims against Deloitte, and that a settlement agreement entered into between Lead Plaintiffs and the Trust on August 30, 2010 ("Trust Settlement Agreement") "preserves all claims against [Deloitte]," is "clear and unambiguous," and contains a merger clause; (2) Deloitte "is not entitled to promissory estoppel as there is no promise to enforce," and there could have been no reasonable reliance because the Trust Settlement Agreement preserved all claims against Deloitte; and (3) Deloitte "is not entitled to declaratory relief because . . . [it] lacks third-oarty standing to bring its underlying claims." (Mem. of Law in Supp. of Trust's Mot. for Summ. J., dated Apr. 2, 2012 ("Trust Mem."), at 9, 10, 11, 21, 23-24.)

On May 2, 2012, Deloitte filed an opposition arguing, among other things, that (1) there is an exception to the parol evidence rule for collateral agreements, and "there are disputed issues of material fact as to whether the [Trust] Release Agreement is an enforceable collateral agreement"; (2) there is ample evidence in the record that the Trust promised to grant Deloitte a release if requested to do so as part of a settlement of the underlying securities action between Deloitte and Lead Plaintiffs, and Deloitte "reasonably relied on this promise in pursuing months of settlement discussions with Lead Plaintiffs"; and (3) Deloitte is the "express intended beneficiary" of the Trust Release Agreement and "properly seeks a declaration of its rights as a third-party beneficiary." (Deloitte's Mem. of Law in Opp'n to the Trust's Mot. for Summ. J. on the Countercls., dated May 2, 2012 ("Deloitte Opp'n"), at 14, 23--25.)

On May 16, 2012, the Trust filed a reply. (See Reply Mem. of Law in Further Supp. of the Trust's Mot for Summ. J., dated May 16, 2012.) The parties waived oral argument.

The following facts are undisputed.

In or around October 2004, the parties entered into a "Proposed Global Settlement" to settle all of the claims among them in the underlying securities action and in the parallel bankruptcy proceeding of Actrade Financial Technologies, Ltd. and Actrade Capital Inc. (collectively, "Actrade") in the United States Bankruptcy Court for the Southern District of New York. (Deloitte's Resp. to the Trust's Statement of Undisputed Facts, dated May 2, 2012 ("Deloitte 56.1 Resp."), ¶ 15.) And, on March 10, 2005, the Trust filed a motion for approval of the Proposed Global Settlement in the Bankruptcy Court. (Deloitte 56.1 Resp. ¶ 18.)

On November 6, 2008, the Trust apparently reversed course and requested that the Bankruptcy Court disapprove the Proposed Global Settlement because of "new information" of "a massive fraudulent scheme orchestrated by" Actrade's former Chairman, Amos Aharoni ("Aharoni"). (Deloitte 56.1 Resp. ¶ 20.) By letter to Deloitte, dated December 9, 2008, the Trust stated in relevant part as follows:

This letter will confirm that it is also the Trustee's intent, were the Bankruptcy Court not to approve the [Proposed Global Settlement], to negotiate in good faith for [] a [m]odified

[s]ettlement and that the Trustee anticipates that any such

[m]odified [s]ettlement, like the [Proposed Global Settlement], will include a mutual release of claims between the Trustee (for the Actrade bankruptcy estates) and Deloitte. (Decl. of Michelle Zolnoski, dated Apr. 2, 2012 ("Zolnoski Decl."), Ex. DDD.) On December 16, 2008, United States Bankruptcy Judge Allan L. Gropper issued a bench ruling disapproving the Proposed Global Settlement. (See Hr'g Tr., dated Dec. 16, 2008, at 49--52 (THE COURT: "[E]vidence has been uncovered in recent months that Aharoni lied to the trustee or his predecessor, and that Aharoni misappropriated up to $31 million of funds . . . . This Court cannot find that the settlement reaches the level of reasonableness required under [Fed. R. Bankr. P.] 9019.").)

On January 22, 2010, this Court affirmed Judge Gropper's December 16, 2008 ruling. See In re Actrade Fin. Techs. Ltd., Nos. 09 Civ. 4479, 4480 (S.D.N.Y. Jan. 22, 2010).

In or around April 2010, Lead Plaintiffs and the Trust began negotiating a new settlement. (Deloitte 56.1 Resp. ¶ 31.) By July 2010, they had begun exchanging draft agreements, and by email dated August 5, 2010, Lead Plaintiffs' counsel, Thomas Shapiro ("Shapiro"), wrote to the Trust's then-counsel, Patrick Salisbury ("Salisbury"), in relevant part as follows:

I also want to confirm your advice to me that the Trust is not proceeding against Deloitte. I would like an understanding that the Trust will give Deloitte a release if it requests ...

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