842 F. Supp. 2d 733
S.D.N.Y.2012Background
- Tadiran Communications Ltd. opened a CSS brokerage account in 2004 and purchased ARS intended to be government-backed.
- CSS/CSS employees allegedly moved Tadiran to ARS backed by CDOs, not government paper, without Tadiran’s knowledge in some cases.
- Tadiran attempted to liquidate in 2007; market for ARS/CDO-backed securities was illiquid.
- Tadiran’s CFO believed holdings were government-backed, leading to confusion about sale difficulties.
- In November 2007 Tadiran and CSS settled; Tadiran signed a general release releasing claims known to Tadiran concerning its Tadiran/Credit Suisse brokerage account.
- Elbit Systems Ltd., Tadiran’s successor, later sued Credit Suisse Group and CSS for securities fraud, common law fraud, and unjust enrichment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the Release bar Elbit’s fraud claims? | Elbit argues the release covers only known claims, leaving unknown fraud claims intact. | Credit Suisse contends the release bars all known claims, including fraud, regardless of unknowns. | Triable issue; release limited to known claims, facts/knowledge contested. |
| How should 'known' be interpreted in the Release? | Two uses of 'known' create two conditions: known claims and known to concern Tadiran’s brokerage account. | Single interpretation: Tadiran needed to know the specific fraud claim. | Court adopts two-fold reading; known means known to Tadiran and pertaining to the brokerage account. |
| Is there a fact dispute over whether Tadiran knew of the fraud claims at signing? | Elbit contends Tadiran knew it was defrauded or understood there was fraud. | Credit Suisse argues Tadiran knew enough about basic fraud elements to release. | Yes—there is a genuine fact issue; knowledge is unresolved and must be tried. |
| What law governs the Release and how is it interpreted? | New York contract-interpretation governs and favors Elbit’s reading under NY law. | New York law governs but should be construed to release all known claims. | New York law applies; interpretation hinges on contract language and intent. |
Key Cases Cited
- Bank of Am. Nat'l Trust & Sav. Ass’n ex rel. Zanuck v. Gillaizeau, 766 F.2d 709 (2d Cir. 1985) (releases require explicit present promise; strict scrutiny for misconduct releases)
- Golden Pac. Bancorp v. F.D.I.C., 273 F.3d 509 (2d Cir. 2001) (releases barred as ambiguous regarding scope of liability)
- Mangini ex rel. Mangini v. McClurg, 24 N.Y.2d 556 (1969) (release scope not limited to known claims; no mutual mistake defense here)
- Verstreate v. Cohen, 242 A.D.2d 862 (4th Dep’t 1997) (release of known and unknown claims; distinguishes here’s limits)
- RBS Holdings, Inc. v. Wells Fargo Century, Inc., 485 F. Supp. 2d 472 (S.D.N.Y. 2007) (release with general effect; contrasts with known-claims limitation here)
- Paneccasio v. Unisource Worldwide, Inc., 532 F.3d 1011 (2d Cir. 2008) (contract interpretation and ambiguity standard; look to integrated agreement)
- Sayers v. Rochester Tel. Corp. Supp. Mgmt. Pension Plan, 7 F.3d 1091 (2d Cir. 1993) (ambiguity assessment in contract interpretation)
- United States v. Broad. Music, Inc., 275 F.3d 168 (2d Cir. 2001) (plain meaning prevails if contract unambiguous)
- Seiden Assocs., Inc. v. ANC Holdings, Inc., 959 F.2d 425 (2d Cir. 1992) (contract interpretation aims to give effect to parties’ intent)