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Landesbank v. Nebraska Investment Finance Authority

United States District Court, S.D. New York

February 27, 2017

BAYERISCHE LANDESBANK, Plaintiff/Counter-Defendant,


          KATHERINE POLK FAILLA, District Judge:

         Pending before the Court are two cross-motions for summary judgment. Defendant/Counter-Claimant Nebraska Investment Finance Authority (“NIFA”) seeks summary judgment on its three breach-of-contract counterclaims, and dismissal of Plaintiff/Counter-Defendant Bayerische Landesbank's (“BayernLB”) breach-of-contract, unjust-enrichment, and fraud claims.[1]BayernLB seeks the converse: summary judgment on its three claims and dismissal of NIFA's three counterclaims.

         The parties' arguments, while diametric, suffer from the same two problems. The first is that the three investment agreements at the heart of this case (the “Investment Agreements”) are ambiguous. The second is that the extrinsic evidence the parties have introduced does not resolve the Investment Agreements' ambiguities. Those problems do not prevent the Court from dismissing BayernLB's unjust-enrichment claim (as BayernLB concedes the Court should) or its fraud claim (which is merely duplicative of its underlying contract claim). But they do preclude the Court from entering summary judgment on any of the contract claims or counterclaims in this case.

         Accordingly, and for the reasons set forth below, BayernLB's motion for summary judgment is denied, and NIFA's motion for summary judgment is granted in part and denied in part.


         A. Factual Background

         The parties agree on most of the facts. They also agree that, at root, this case is a dispute over the three Float Accounts created by the three Investment Agreements. (BayernLB 56.1 Response ¶ 2).

         NIFA is “an independent instrumentality” organized under Nebraska law. (BayernLB 56.1 Response ¶ 9). One of NIFA's functions is to provide mortgages to Nebraskans, a function NIFA facilitates by issuing bonds. (Id. at ¶¶ 9-10). NIFA uses the proceeds of these bonds to purchase mortgage-backed securities and mortgage loans. (Id. at ¶ 12). Depending on the term of the underlying mortgages, some of NIFA's investments can generate revenue for over 30 years. (Id. at ¶ 13).

         On July 1, 1994, NIFA and its then-Trustee, Norwest Bank Minnesota, N.A. (the “Trustee”), entered into a General Indenture of Trust (the “General Indenture”). (NIFA 56.1 Response ¶ 3).[3] In 1998, NIFA and the Trustee entered into three Supplemental Indentures of Trust (the “Supplemental Indentures”) - one for each of the three bond series at issue in this litigation: (i) the January 1, 1998 Supplemental Indenture, entered into in connection with NIFA's Single Family Housing Revenue Bonds 1998 Series A/B (the “A/B Series”); (ii) the June 1, 1998 Supplemental Indenture, which corresponds to NIFA's 1998 Series C/D/E/F (the “C/D/E/F Series”); and (iii) the October 1, 1998 Supplemental Indenture, which relates to NIFA's 1998 Series G/H bonds (the “G/H Series”). (Id. at ¶¶ 3-4; Kenny Decl., Ex. C, E, G).

         The General Indenture and Supplemental Indentures authorize the Trustee to invest the proceeds of NIFA's mortgages and mortgage-backed securities. (BayernLB 56.1 Response ¶ 22; NIFA 56.1 Response ¶ 7). To this end, in 1998, the Trustee and BayernLB entered into three Investment Agreements that correlate with the three aforementioned bond series: (i) the January 8, 1998 Investment Agreement, entered into in connection with NIFA's A/B Series; (ii) the June 4, 1998 Investment Agreement, which corresponds to the C/D/E/F Series; and (iii) the October 23, 1998 Investment Agreement, which relates to NIFA's G/H Series. (NIFA 56.1 Response ¶ 18; Gausepohl Decl., Ex. B, D, F). This case is about one class of accounts that these three Investment Agreements created: the Float Accounts. (BayernLB 56.1 Response ¶ 2).

         Three provisions of the Investment Agreements merit close attention here. The first describes the types of funds that the Trustee could deposit into the Float Accounts. The Investment Agreements - the language in all three is virtually identical - provide that “[t]he Trustee shall … deposit amounts held in the Float Fund (described in Schedule I to Exhibit A) to the Float Account (described in Schedule I to Exhibit A).” (Gausepohl Decl., Ex. B, § 1.1(b); id. at Ex. D, § 1.1(c); id. at Ex. F, § 1.01(b)). And Schedule I to the Investment Agreements defines “Float Fund” as follows: “Collectively, the 1998 Series [A/B/C/D/E/F/G/H] Capitalized Interest Account, deposits to the Debt Service Fund, Revenue Fund and Redemption Fund established under the Indenture related to the 1998 Series [A/B/C/D/E/F/G/H] Bonds.” (Id. at Ex. B, A-3; accord Id. at Ex. D, A-3; id. at Ex. F, A-3).

         The second important provision in the Investment Agreements provides a termination date for the Float Accounts. Per the Investment Agreements, the Float Accounts would terminate after one of the following triggering events:

The first to occur of [i] a withdrawal of all Invested Moneys on deposit in this Account and either the date the Depository has received written notice from the Trustee in the form of Exhibit C that no additional deposits will be made to this Account or the date on which the Trustee may no longer make any additional deposits to this Account or [ii] September [1 or 4], 2029.

         (Gausepohl Decl., Ex. B, § 2 and A-3; id. at Ex. D, § 2 and A-4; id. at Ex. F, art. 2 and A-3 to A-4).

         Finally, all three Investment Agreements obligate the Trustee to notify BayernLB if the bonds underlying the Investment Agreements are refunded. Per Section 7.13 of the Investment Agreements: “The Trustee shall promptly notify the Depository in writing as soon as any action is taken to effect a partial or complete refunding of the Bonds.” (Gausepohl Decl., Ex. B, § 7.13; id. at Ex. D, § 7.13; id. at Ex. F, § 7.13).

         NIFA redeemed the A/B Series, C/D/E/F Series, and G/H Series bonds in 2010. (NIFA 56.1 Response ¶ 32). However, the Trustee kept depositing money into the Float Accounts after NIFA redeemed these bonds. (Id. at ¶ 35).

         The relationship between NIFA and BayernLB was copacetic until August 2015, when BayernLB informed NIFA that it intended to terminate the Investment Agreements and return the funds NIFA had invested with BayernLB. (BayernLB 56.1 Response ¶¶ 51-53). BayernLB followed through with that plan on August 21, 2015, and this suit followed. (BayernLB 56.1 Response ¶ 54; NIFA 56.1 Response ¶ 39).

         B. Procedural Background

         On August 22, 2015, NIFA sued BayernLB in the United States District Court for the District of Nebraska. (NIFA 56.1 Response ¶ 41; Deutch Decl., Ex. U). NIFA voluntarily dismissed that suit on October 28, 2015. (NIFA 56.1 Response ¶ 44; Deutch Decl., Ex. U).

         The instant case began on September 15, 2015, when BayernLB filed its Complaint against NIFA. (Dkt. #1).[4] In broad strokes, the Complaint alleges that NIFA breached all three Investment Agreements by depositing money into the Float Accounts after redeeming the underlying bonds. The Complaint brings three Counts: ...

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