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In re Bank of New York Mellon Corp. Forex Transactions Litigation

United States District Court, S.D. New York

July 9, 2014

In re: BANK OF NEW YORK MELLON CORP. FOREX TRANSACTIONS LITIGATION
v.
The Bank of New York Mellon Corp., et al., 12 Civ. 3066 (LAK) This document relates to: Southeastern Pennsylvania Transp. Auth. International Union of Operating Engineers, Stationary Engineers Local 39 Pension Trust Fund
v.
The Bank of New York Mellon Corp., et al., 12 Civ. 3067 (LAK) Ohio Police & Fire Pension Fund, et al.
v.
The Bank of New York Mellon Corp., et al., 12 Civ. 3470 (LAK).

Joseph H. Meltzer, Sharan Nirmul, Shannon O. Braden, Sekou Campbell, KESSLER TOPAZ MELTZER & CHECK, LLP, Elizabeth J. Cabraser, Steven E. Fineman, Daniel P. Chiplock, Daniel E. Seltz, Michael J. Miarmi, LIEFF CABRASER HEIMANN & BERNSTEIN, LLP, Attorneys for Plaintiffs.

Brian K. Murphy, MURRAY MURPHY MOUL & BASIL, LLP, Attorney for Plaintiff Ohio Police & Fire Pension Fund

Michael P. Thornton, Michael A. Lesser, THORNTON & NAUMES, LLP, Michael P. Lehmann, Christopher L. Lebsock, HAUSFELD, LLP, Gregory S. Hach, Michael A. Rose, Frank R. Schirripa, HACH ROSE SCHIRRIPA & CHEVERIE, LLP, Attorneys Plaintiff International Union of Operating Engineers.

Bradley E. Beckworth, Brad Seidel, Jeffrey J. Angelovich, NIX PATTERSON & ROACH, LLP, Attorneys for Plaintiff Southeastern Pennsylvania Transportation Authority.

Reid M. Figel, Rebecca A. Beynon, David L. Schwarz, Derek T. Ho, Gregory G. Rapawy, Andrew C. Shen, KELLOG HUBER HANSEN TODD EVANS & FIGEL, PLLC, Attorneys for Defendants.

MEMORANDUM OPINION

LEWIS A. KAPLAN, District Judge

The plaintiffs in these three actions all were or are customers of the Bank of New York Mellon ("BNYM")[1] that contracted with BNYM to execute certain foreign exchange transactions on their behalf. They now allege that BNYM is liable for breaches of fiduciary duties, contract, and the implied covenant of good faith and fair dealing, conversion, unjust enrichment, and certain violations of state business law for assigning fictitious foreign currency exchange rates to the plaintiffs' purchases and sales of foreign securities in violation of contractual guarantees. The Department of Justice and several other groups of private plaintiffs also have sued BNYM for alleged damages stemming from its foreign exchange practices. In response, BNYM counterclaimed for indemnification from the Southeastern Pennsylvania Transportation Authority ("SEPTA"), the International Union of Operating Engineers ("IUOE Local 39") and its Trustees, [2] and, conditionally, from the unnamed putative class members in all three cases.

The plaintiffs now move to dismiss those counterclaims, arguing that (1) they are untimely; (2) the counterclaims against the IUOE Local 39 and its Trustees were waived; (3) they fail to state a plausible claim; and (4) conditional counterclaims against absent class members are improper.

Background

SEPTA filed its original complaint against BNYM in March 2011, IUOE Local 39 in July 2011, and Ohio Police and Fire in April 2012. BNYM answered IUOE Local 39's amended complaint, but never answered in the other two actions. After the cases were transferred to this district as part of the multi-district litigation against BNYM, the Court granted the plaintiffs leave to file a Master Customer Class Complaint.[3] The Court subsequently entered a scheduling order requiring that any answers to complaints be filed by September 15, 2013.[4] It was silent on the topic of counterclaims.

On September 15, 2013 BNYM answered the Master Customer Class Complaint and included its counterclaims for indemnification. It asserts that the counterclaims arise under the Master Trust Agreement ("MTA"), pursuant to which it provided custody services to SEPTA, and the Global Custody Agreement ("GCA"), pursuant to which it provided custody services to IUOE Local 39. BNYM is seeking, at minimum, indemnification for costs and attorneys fees incurred in defending against these actions and, at broadest, indemnification also for costs, attorneys fees, and any liability assessed against it in the related actions, to the extent that those actions arise out of the MTA and GCA.

The MTA provides that SEPTA will compensate BNYM for, inter alia, expenses and "reasonable attorneys' fees, that may be incurred by, imposed upon, or asserted against [BNYM] by reason of any claim, regulatory proceeding, or litigation arising from any act done or omitted to be done by any individual or person with respect to the Participating Plans or Master Trust Fund, excepting only any and all cost and expense arising solely from [BNYM's] negligence, bad faith, or breach of fiduciary duty."[5]

Similarly, the GCA provides that IUOE Local 39 "will be liable for and will indemnify and keep fully indemnified... [BNYM] and its nominees and hold them harmless from and against, any and all Losses howsoever arising from or in connection with this Agreement or the performance of their duties hereunder (including disputes between the parties or enforcement of this Agreement), provided, however, that nothing contained herein shall require that [BNYM] or its nominees be indemnified for their respective fraud, negligence, or willful misconduct...."[6]

The parties agree, for the purposes of this motion, that Pennsylvania law controls the claim for indemnification against SEPTA under the MTA and California law controls the claim for ...


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