ABN AMRO Bank, N.V. v. MBIA Inc.
17 N.Y.3d 208
NY2011Background
- MBIA Insurance sold financial guarantee policies, including structured-finance policies, to unrelated banking institutions seeking relief in the plenary action.
- In February 2009 the Superintendent approved MBIA’s Transformation, restructuring MBIA Insurance and related entities to separate portfolios, following MBIA’s ex parte application under Insurance Law §§ 1308, 1411, 4105, 6906, and 1505.
- The Transformation involved a dividend to MBIA Inc., a stock redemption, transfers to MuniCo Holdings, and MBIA Illinois capitalization, followed by a cut-through reinsurance arrangement that allowed direct claims against MBIA Illinois and MBIA Insurance.
- Policyholders allege the Transformation rendered MBIA Insurance undercapitalized and claim MBIA Insurance fraudulently conveyed assets for no consideration, violating Debtor and Creditor Law (DCL) and common law, seeking divestiture of transfers, joint/ several liability, or damages.
- Defendants moved to dismiss arguing the plenary action is an impermissible collateral attack on the Superintendent’s approval, which should be challenged only via CPLR article 78; plaintiffs also asserted several causes of action under DCL and common law.
- Supreme Court denied the motion to dismiss; the Appellate Division reversed in part, sustaining a collateral-attacks framework, while the majority held the claims viable; the Court later modified and affirmed in part, rejecting the collateral-attack premise and allowing some DCL/common-law claims to proceed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the Insurance Law grant exclusive original jurisdiction to challenge the Transformation? | Plaintiffs contend the transformation can be attacked in court under general jurisdiction, not exclusively via article 78. | Defendants argue the Superintendent’s exclusive original jurisdiction precludes plenary suits against the Transformation. | No exclusive preemption; Supreme Court retains general jurisdiction. |
| Does the Superintendent’s approval preclude Debtor and Creditor Law and common-law claims? | Plaintiffs maintain the approvals do not bar their private claims for fraudulent conveyance and related relief. | Defendants argue the approval bars collateral challenges to the restructuring. | Transformation approval does not bar the plenary action. |
| Are the plaintiffs’ Debtor and Creditor Law claims sufficiently pleaded? | Plaintiffs allege transfers left MBIA Insurance undercapitalized and with insufficient consideration, satisfying DCL §§ 273–276. | Defendants argue the facts do not show improper conveyances or sufficient insolvency indicators. | Yes; pleaded with adequate particularity and plausible intent to defraud. |
| Are the plaintiffs’ common-law claims viable, including breach of implied covenant, veil-piercing, and unjust enrichment? | Plaintiffs contend MBIA Insurance’s conduct breached the implied covenant, abused the corporate form, and enriched defendants at plaintiffs’ expense. | Defendants challenge these as inadequately pled and improperly duplicative of DCL claims. | Breach of implied covenant and veil-piercing viable; unjust enrichment dismissed. |
Key Cases Cited
- Sohn v. Calderon, 78 N.Y.2d 755 (1991) (Supreme Court original jurisdiction and limits on agency preemption)
- Richards v. Kaskel, 32 N.Y.2d 524 (1973) (Limited agency authority does not preclude private actions)
- Capitol Tel. Co. v. Pattersonville Tel. Co., 56 N.Y.2d 11 (1982) (Collateral estoppel and administrative decisions in context)
- Capital Tel. Co. v. Pattersonville Tel. Co., 56 N.Y.2d 11 (1982) (Collateral estoppel and administrative decisions in context)
- Gilberg v. Barbieri, 53 N.Y.2d 285 (1981) (Due process and privity considerations in preclusion)
- Matter of Morris v. New York State Dept. of Taxation & Fin., 82 N.Y.2d 135 (1993) (Veil-piercing standard and abuse of corporate form)
- United States v. Bestfoods, 524 U.S. 51 (1998) (Corporate veil and parent-subsidiary liability principle)
- Moody v. Security Pac. Bus. Credit, Inc., 971 F.2d 1056 (3d Cir. 1992) (DCL insolvency and capital maintenance standards)
- Shah v. Metropolitan Life Ins. Co., 2003 NY Slip Op 50591(U) (Sup Ct NY County 2003) (Preemption considerations in demutualization context)
- Dalton v. Educational Testing Serv., 87 N.Y.2d 384 (1995) (Implied covenant and contract interpretation standards)