Ritchie Risk-Linked Strategies Trading (Ireland), Ltd. v. Coventry First LLC
673 F. App'x 57
2d Cir.2016Background
- Coventry First and affiliate LST bought and sold life insurance policies in the life-settlement secondary market; Ritchie I and II were SPVs set up to buy policies from LST to securitize and resell.
- Between July 2005 and Sept. 2006 Ritchie purchased >1,000 policies from LST, which LST had sourced from Coventry First.
- The New York Attorney General (NYAG) issued subpoenas to Coventry First in 2005 and 2006 and investigated industry practices; the NYAG filed suit against Coventry First on Oct. 26, 2006.
- Ritchie notified LST of termination and alleged breach (including breach of a No Proceedings Warranty) after the NYAG complaint and sued LST in Feb. 2009 for >$400 million.
- At bench trial the district court found (a) LST did not breach the No Proceedings Warranty before Oct. 2006, and (b) Ritchie waived claims other than the No Proceedings Warranty by failing to give the contractually required notice within 30 business days.
- Ritchie appealed, arguing (1) the district court misread testimony showing the NYAG threatened an action, (2) notice was excused as futile, and (3) the court improperly decided claims that the pretrial order had carved out of trial.
Issues
| Issue | Ritchie's Argument | LST/Coventry's Argument | Held |
|---|---|---|---|
| Whether NYAG communications before Oct. 2006 "threatened" an action so LST breached the No Proceedings Warranty | Axinn's testimony that he told Coventry counsel in Feb. 2006 the NYAG might follow up with an action amounted to a threat, triggering breach | Communications reflected an industry-wide investigation and non-confrontational interactions; no clear evidence NYAG signaled an imminent action against Coventry pre-Oct.2006 | Court: No clear error in district court factual findings; LST did not breach the No Proceedings Warranty pre-Oct.2006. |
| Whether Ritchie waived claims by failing to give 30-business-day notice under the Notice and Waiver Provision | Notice was futile because LST could not cure or replace affected policies, so Ritchie should not be barred | The contract unambiguously waived claims if actual knowledge existed and notice was not given; futility defense is narrow and inapplicable | Court: Provision is clear; Ritchie knew of the NYAG action by Nov.2006 and failed to give notice, so claims (other than No Proceedings Warranty) were waived. |
| Availability of futility or similar defenses to excuse notice under this contract | Futility excused Ritchie from giving notice | Futility applies rarely; where notice-and-cure exists, futility requires repudiation or clear refusal to perform; here provision is a waiver, not notice-and-cure | Court: Futility not shown; provision is waiver-based and must be enforced; futility defense does not apply. |
| Whether the district court abused discretion by deciding claims the pretrial order carved out | Trial should not have resolved claims the parties removed from trial per the pretrial order | Pretrial order allowed trial of defenses including contractual waiver; court managed trial within Rule 16 discretion | Court: No abuse of discretion; parties litigated waiver defenses and the court properly concluded those defenses disposed of untried claims. |
Key Cases Cited
- Diesel Props. S.R.L. v. Greystone Bus. Credit II LLC, 631 F.3d 42 (2d Cir.) (standards for reviewing bench-trial findings and clear-error review)
- Freedom Holdings, Inc. v. Cuomo, 624 F.3d 38 (2d Cir.) (appellate affirmation on any ground apparent in the record)
- Doe v. Menefee, 391 F.3d 147 (2d Cir.) (factfinder must account for conflicting evidence; assessment of clear error)
- Filmline (Cross-Country) Prods., Inc. v. United Artists Corp., 865 F.2d 513 (2d Cir.) (limited availability of futility defense under New York law)
- Bausch & Lomb Inc. v. Bressler, 977 F.2d 720 (2d Cir.) (futility in notice-and-cure context requires repudiation or clear refusal to perform)
- HBE Leasing Corp. v. Frank, 22 F.3d 41 (2d Cir.) (district court's broad discretion to manage trial and modify pretrial orders)
- Greenfield v. Philles Records, Inc., 98 N.Y.2d 562 (N.Y.) (clear, unambiguous written agreements are enforced according to plain meaning)
- A.H.A. Gen. Constr., Inc. v. N.Y.C. Hous. Auth., 92 N.Y.2d 20 (N.Y.) (frustration defense does not excuse contractual obligations)