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BPP Illinois, LLC v. Royal Bank of Scotland Group PLC

United States Court of Appeals, Second Circuit

June 13, 2017

BPP ILLINOIS, LLC, BPP IOWA, LLC, BPP MICHIGAN, LLC, BPP MINNESOTA, LLC, BPP TEXAS, LLC, FFC PARTNERSHIP, L.P., FINE CAPITAL ASSOCIATES, L.P., BPP WISCONSIN, LLC, BUDGET PORTFOLIO PROPERTIES, LLC, Plaintiffs-Appellants,
v.
THE ROYAL BANK OF SCOTLAND GROUP PLC, RBS CITIZENS, N.A., CITIZENS BANK OF PENNSYLVANIA, Defendants-Appellees.

          Argued: October 20, 2016

          A group of hotel-related businesses, along with their investor and guarantors, appeal the dismissal of their fraud claims against the Royal Bank of Scotland and two of its subsidiaries. As to the hotel plaintiffs, the United States District Court for the Southern District of New York (Furman, J.) ruled that, because they had failed to list their cause of action in a schedule of assets in their now-concluded bankruptcy proceeding, they lacked standing to bring the claim and were barred by judicial estoppel. The claims of the investor and guarantors were dismissed as untimely and barred by the law of the case. We affirm on the grounds of judicial estoppel and timeliness.

          JOHN SIEGAL (Dominic A. Gentile and Thomas D. Warren on the brief), Baker Hostetler LLP, New York, NY, for Plaintiffs-Appellants.

          DAVID SAPIR LESSER (Jamie S. Dycus, Colin Reardon, and Ryan D. Tansey on the brief), Wilmer Cutler Pickering Hale and Dorr LLP, New York, NY, for Defendants-Appellees.

          Before: JACOBS, POOLER, Circuit Judges, and CRAWFORD, District Judge. [*]

          DENNIS JACOBS, Circuit Judge

         A group of hotel-related businesses, along with their investor and guarantors, appeal the dismissal of their fraud claims against the Royal Bank of Scotland and two of its subsidiaries. As to the hotel plaintiffs, the United States District Court for the Southern District of New York (Furman, J.) ruled that, because they had failed to list their cause of action in a schedule of assets in their now-concluded bankruptcy proceeding, they lacked standing to bring the claim and were barred by judicial estoppel. The claims of the investor and guarantors were dismissed as untimely and barred by the law of the case. We affirm on the grounds of judicial estoppel and timeliness.

          I

         BPP Illinois, LLC, as one of a consortium of single-purpose entities that own and manage hotels (collectively "BPP"), together with corporate affiliates of BPP that guaranteed a loan taken out by BPP (the "FFC Plaintiffs"), and an investor of BPP (the "Equity Plaintiff"), allege that the defendants--the Royal Bank of Scotland Group PLC ("RBS") and two of its subsidiaries, RBS Citizens, N.A. ("RBS Citizens") and the Citizens Bank of Pennsylvania ("Citizens Bank")--fraudulently induced BPP to enter a loan agreement with Citizens Bank, and that the loan eventually pushed BPP into bankruptcy. The district court initially dismissed the fraud and related claims against BPP on the ground that they were untimely under the applicable statute of limitations, and dismissed the claims against the FFC Plaintiffs and the Equity Plaintiff for failure to plead fraud with sufficient particularity. In a previous appeal, we vacated the judgment as to BPP, and affirmed with respect to the other plaintiffs. BPP Illinois, LLC v. Royal Bank of Scotland Grp. PLC, 603 F.App'x 57, 58 (2d Cir. 2015). On remand, Judge Furman concluded that, based on BPP's failure to list its claims in its schedule of assets in a prior bankruptcy proceeding, BPP lacked standing to assert the claims against the defendants, or in the alternative, were judicially estopped from bringing the claims. Judge Furman also denied a request from the FFC Plaintiffs and the Equity Plaintiff to amend their complaint, finding that amendment would be untimely and barred by the law of the case. We conclude that BPP is judicially estopped from bringing suit, [1] and that request for leave to amend by the FFC Plaintiffs and Equity Plaintiff was properly denied as untimely.

         We review de novo a grant of a motion to dismiss, "accept[ing] as true the factual allegations made in the complaint and draw[ing] all inferences in favor of the plaintiffs." Grandon v. Merrill Lynch & Co., 147 F.3d 184, 188 (2d Cir. 1998). Many courts review application of judicial estoppel for abuse of discretion, see Intellivision v. Microsoft Corp., 484 F.App'x 616, 618 & nn.1-2 (2d Cir. 2012), but because we would affirm the district court under de novo review, we need not consider whether a more deferential standard of review should apply.

         II

         In 2008, BPP borrowed $66 million from Citizens Bank to finance the purchase of several hotel properties. The transaction was a loan-and-swap arrangement. The loan component required BPP to pay Citizens Bank interest at 1.65% above the U.S. Dollar London Interbank Offered Rate ("LIBOR").[2] The swap required Citizens Bank to pay LIBOR to BPP, and required BPP to pay interest to Citizens Bank at 3.1625%. The net effect of the loan and swap was that BPP paid Citizens Bank a fixed interest rate of approximately 4.8%.

         In 2010, BPP filed for bankruptcy in the Eastern District of Texas. BPP's schedule of its assets, including legal claims, never listed claims against RBS or RBS Citizens, nor did it include claims against Citizens Bank on the basis of alleged LIBOR manipulation.

         While the bankruptcy proceeding was ongoing, there were indications that RBS might be implicated in an improper manipulation of LIBOR. Media entities reported that government regulators were investigating possible manipulation of LIBOR. And on May 6, 2011, RBS disclosed that it was cooperating with investigations. By August 2011, numerous ...


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