784 F. Supp. 2d 296
S.D.N.Y.2011Background
- Ancile filed suit in SDNY against Archer Daniels Midland alleging Brazilian law claim and NY law claims for breach of bailment, breach of contract, and conversion related to bills of lading pledged as security for financing of Solo Vivo's fertilizer imports.
- Plaintiff financed Solo Vivo under a June 2007 Credit Facility Agreement; Solo Vivo pledged all bills of lading and documents of title as security for the loans.
- Defendant allegedly endorsed bills of lading in blank and delivered them to Solo Vivo rather than to Ancile, despite Ancile's financing and instructions tied to payments received from Ancile.
- Plaintiff paid portions of invoices (approx. 83.33%) and later alleged Defendant did not endorse or deliver the respective bills to Ancile, undermining Ancile's security interest.
- The Complaint asserts a prior course of dealing and requests implied contractual obligations to endorse/deliver bills, but the court found no enforceable contract or bailment based on these allegations.
- The court granted partial dismissal of the NY-law claims, dismissing breach of contract, bailment, and conversion claims, with leave to address the Brazilian claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Ancile states a valid NY breach of contract claim | Ancile contends there was an implied contract to deliver Bills of Lading to Ancile as security. | No direct contract; prior course of dealing cannot form a contract or create enforceable duty. | Breach of contract claim dismissed |
| Whether Ancile states a valid NY bailment claim | Defendant became bailee due to sole Vivo's pledge and Ancile's superior right after payment; constructive bailment arises. | No actual/constructive delivery or perfected pledge; no duty to account established. | Bailment claim dismissed |
| Whether Ancile states a valid NY conversion claim | Defendant converted the Bills of Lading and cargo by not delivering to Ancile. | No immediate superior right of possession; unperfected security interest cannot support conversion. | Conversion claim dismissed |
| Choice-of-law impact on NY claims | Not separately framed as a NY-law issue; implied consent to NY law governs motion. | Explicit/implied consent to NY law; NY law applies for motion to dismiss. | New York law applied; NY claims dismissed |
Key Cases Cited
- Eternity Global Master Fund Ltd. v. Morgan Guaranty Trust Co. of New York, 375 F.3d 168 (2d Cir.2004) (contract claim plausibility standard under Twombly/Iqbal)
- Rexnord Holdings v. Bidermann, 21 F.3d 522 (2d Cir.1994) (elements of contract claim and privity requirements)
- Yucyco, Ltd. v. Republic of Slovenia, 984 F. Supp. 209 (S.D.N.Y.1997) (standing to enforce contract against non-party)
- Consol. Edison, Inc. v. Ne. Utils., 426 F.3d 524 (2d Cir.2005) (intent to create third-party beneficiary under Restatement approach)
- Levin v. Tiber Holding Corp., 277 F.3d 243 (2d Cir.2002) (analysis of intended beneficiary under Restatement § 302)
- Fourth Ocean Putnam Corp. v. Interstate Wrecking Co., 66 N.Y.2d 38 (1985) (intent to benefit third party and enforcement considerations)
- McCoy v. Am. Express Co., 253 N.Y. 477 (1930) (pledge requires delivery; possession rules in pledges)
- Cherry River Music Co. v. Simitar Entertainment, Inc., 38 F. Supp. 2d 310 (S.D.N.Y.1999) (prior course of dealing vs. contract formation)
- Fasolino Foods Co., Inc. v. Banca Nazionale del Lavoro, 761 F. Supp. 1010 (S.D.N.Y.1991) (prior course of dealing interpretation limits contract formation)
- AB Recur Finans v. Nordstern Insurance Company of North America, 130 F. Supp. 2d 596 (S.D.N.Y.2001) (constructive bailment requires more than notice of security interest)