COPIC Insurance v. Wells Fargo Bank, N.A.
767 F. Supp. 2d 1191
D. Colo.2011Background
- COPIC Insurance Company participated in Wells Fargo's Securities Lending Program after a 1999 custody agreement.
- Wells Fargo acted as trustee/agent; collateral investments were placed in a Wells Fargo Trust for Securities Lending with two fund series (EY Fund and CI Term Fund).
- SLA required collateral at 102% and allowed Wells Fargo to invest collateral in short-term instruments; 60/40 sharing of net earnings favored COPIC 60% to COPIC, 40% to Wells Fargo.
- The Trust provided NAV-based redemption at entry terms, with liability limitations for the Trustee under the Declaration of Trust.
- Investments declined in 2007-2008 due to Cheyne Finance SIVs, Stanfield, and Lehman; substantial losses and questions about risk management arose.
- COPIC sought exit and redress after NAV declines and alleged misrepresentations; program wind-down began in late 2008 and continued into 2009-2010.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether contractual limitations of liability bar non-contract claims | Section 8.1/8.4 do not unambiguously eliminate non-contract duties | Declaration limits liability to good faith/bad faith thresholds | Ambiguity remains; non-contract claims survive for jury to decide |
| Whether SLA and related documents govern liability more specifically than Declaration | SLA imposes negligence-based liability for collateral investment; conflict with Declaration | Declaration governs, limits to gross negligence/bad faith | Ambiguity exists; this is an issue of fact for trial |
| Whether the economic loss/independent duty rule bars tort claims | Fiduciary duties arise independently of contract; not barred | Economic loss rule bars duplicative tort claims | Independent duties exist; summary judgment denied for fiduciary claim but some contract-based claims limited |
| Existence and scope of fiduciary duties | Agency relationship imposes fiduciary duties beyond contract | No fiduciary relationship or duties beyond contract | Issues of fact; fiduciary duty may exist and go to trial |
| Whether replevin/conversion/unjust enrichment are barred or limited | Remedies not duplicative of contract claims; may proceed | Independent duty rule/misappropriation issues bar claims | Granted in Wells Fargo's favor for replevin, conversion, and unjust enrichment |
Key Cases Cited
- A. Gay Jenson Farms Co. v. Cargill, Inc., 309 N.W.2d 285 (Minn. 1981) (fiduciary duties and agency carry legal duties under Minnesota law)
- Antelope Co. v. Mobil Rocky Mountain, Inc., 51 P.3d 995 (Colo. App. 2001) (offensive collateral estoppel; final adjudication elements)
- Green v. City of Coon Rapids, 485 N.W.2d 712 (Minn. App. 1992) (collateral estoppel and final judgment requirements)
- Hoyt Props., Inc. v. Prod. Res. Grp., LLC, 716 N.W.2d 366 (Minn. App. 2006) (reliance generally a question of fact; misrepresentation considerations)
- 301 Clifton Place L.L.C. v. 301 Clifton Place Condo. Ass'n, 783 N.W.2d 551 (Minn. App. 2010) (contract interpretation and ambiguity determination; legal questions vs. factual questions)
- In re WorldCom, Inc. Secs. Litig., 336 F. Supp. 2d 310 (S.D.N.Y. 2004) (holder doctrine and reliance considerations in securities context)