INTL FCSTONE MARKETS LLC INTL LLC v. CORRIB OIL COMPANY LTD (2019)

Order, Supreme Court, New York County (Shirley Werner Kornreich, J.), entered on or about April 9, 2018, which granted plaintiff's motion for summary judgment on its claim and dismissing the counterclaims, unanimously affirmed, with costs.

Defendant's claim that there was an investment advisory agreement between the parties is contradicted by the express terms of the ISDA (International Swaps and Derivatives Association, Inc.) master agreement, a fully integrated agreement governing the subject trades between the parties (see Matter of G.K. Las Vegas Ltd. Partnership v. Boies Schiller & Flexner LLP, 96 A.D.3d 538, 540, 947 N.Y.S.2d 29 [1st Dept. 2012], lv denied 19 N.Y.3d 812, 2012 WL 4074126 [2012]).  The disclaimers in the master agreement preclude a finding that defendant relied on any “advice” from plaintiff (see Republic Natl. Bank v. Hales, 75 F. Supp. 2d 300, 315 [SD N.Y.1999], affd sub nom HSBC Bank USA v. Hales, 4 Fed. Appx. 15 [2d Cir.2001]).

Defendant also failed to raise an issue of fact as to whether plaintiff received any compensation for its alleged advisory services (see 15 USC § 80–2[b][11] [Investment Advisers Act of 1940]; 7 USC § 1a[12] [Commodity Exchange Act]).

In view of the foregoing, the counterclaims for negligence and breach of fiduciary duty, which were predicated solely on the alleged advisory agreement, were correctly dismissed (see Pasternack v. Laboratory Corp. of Am. Holdings, 27 N.Y.3d 817, 825, 37 N.Y.S.3d 750, 59 N.E.3d 485 [2016]; Castellotti v. Free, 138 A.D.3d 198, 209, 27 N.Y.S.3d 507 [1st Dept. 2016]).

The fraud counterclaims are barred by the express terms of the ISDA master agreement, which contains directly contrary representations, and by the trade confirmations, which contain the very information as to which defendant claims to have been deceived (see JPMorgan Chase Bank, N.A. v. Controladora Comercial Mexicana S.A.B. De C.V., 29 Misc.3d 1227[A], 2010 N.Y. Slip Op. 52066[U], *7–8, 2010 WL 4868142 [Sup. Ct., N.Y. County 2010]; Negrete v. Citibank, N.A., 187 F. Supp. 3d 454, 466 [S.D. N.Y.2016], affd 759 Fed. Appx. 42 [2d Cir. 2019]).

Defendant is a sophisticated business doing millions of dollars' worth of trades.  Its claim that it did not understand the trade confirmations is unavailing (see Chemical Bank v. Geronimo Auto Parts Corp., 225 A.D.2d 461, 462, 639 N.Y.S.2d 340 [1st Dept. 1996]).

As defendant concedes, its allegation that plaintiff was acting to increase its commissions revenue fails to establish a motive from which to infer a fraudulent intent, or scienter (see Jonas v. Natl. Life Ins. Co., 147 A.D.3d 610, 612, 48 N.Y.S.3d 77 [1st Dept. 2017]).

The allegations supporting the fraud claims also lack particularity, as, with minimal exceptions, they fail to identify who made the misrepresentations, when the misrepresentations were made, and the substance of the misrepresentations (see E1 Entertainment U.S. LP v. Real Talk Entertainment, Inc., 85 A.D.3d 561, 562, 925 N.Y.S.2d 472 [1st Dept. 2011]).

Because the elements of a claim for fraud under the Commodity Exchange Act (CEA) are substantially similar to the elements of common-law fraud, the counterclaim for fraud under the CEA was also correctly dismissed (see Walrus Master Fund Ltd. v. Citigroup Global Mkts., Inc., 2009 WL 928289, *3, 2009 U.S. Dist LEXIS 35040, *7-8 [S.D. N.Y. Mar. 30, 2009]).

Because the breach of contract counterclaim is predicated on a breach of the representation that plaintiff would comply with the Investment Advisers Act of 1940 and the CEA, and the fraud and other CEA counterclaims were correctly dismissed, the breach of contract counterclaim was also correctly dismissed.  Nor can plaintiff's express obligations be varied by the assertion of a claim of breach of the covenant of good faith and fair dealing (see Natl. Union Fire Ins. Co. of Pittsburgh, Pa. v. Xerox Corp., 25 A.D.3d 309, 310, 807 N.Y.S.2d 344 [1st Dept. 2006], lv dismissed 7 N.Y.3d 886, 826 N.Y.S.2d 178, 859 N.E.2d 917 [2006]).