177 F. Supp. 3d 816
S.D.N.Y.2016Background
- SCS (Structured Capital Solutions) developed a deferred asset delivery (DAD) tax-structure and disclosed it to third parties under confidentiality agreements; it later executed an Information Use and Disclosure Agreement (IUDA) with Commerzbank in January 2013.
- IUDA §6 required Commerzbank to enter into a written fee agreement with SCS "prior to effecting any Transaction" involving disclosed material; §7 included carve-outs and a broad disclaimer permitting disclosure of U.S. tax treatment/structure.
- Commerzbank participated as accommodation party in a DAD-style deal with Société Générale that was substantially set by January 8, 2013 (the "2013 Transaction") and later executed a DAD-style transaction in 2014 (the "2014 Transaction") without a fee agreement with SCS.
- SCS sued for breach of contract (IUDA §§3,6,7), unjust enrichment, misappropriation of trade secrets, and fraud; Commerzbank moved for summary judgment on all claims.
- Key factual dispute: whether SCS provided novel, value-creating information to Commerzbank that informed the 2014 Transaction (novelty is dispositive for contract consideration and unjust enrichment), whereas the court found Commerzbank had preexisting knowledge relevant to the 2013 Transaction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability/meaning of IUDA §6 (fee agreement prior to any Transaction) | §6 requires Commerzbank to negotiate/enter a fee agreement before effecting any DAD Transaction; Commerzbank breached by transacting without a fee agreement | §6 is an unenforceable agreement-to-agree; alternatively, IUDA lacks consideration if Commerzbank already knew the idea | Court: §6 is not merely an unenforceable agreement-to-agree in the sense urged by Commerzbank; IUDA also independently prohibits proceeding unless a fee agreement exists, so claim survives as to transactions informed by novel disclosures (denies summary judgment on breach re: 2014 Transaction) |
| Consideration/novelty of disclosed idea | IUDA supported by consideration beyond disclosure (advisory services, introductions); novelty not required because Commerzbank learned DAD via SocGen | In submission-of-idea context, an idea already known to recipient supplies no consideration; if Commerzbank already knew DAD, IUDA fails for lack of consideration | Court: Novelty to the recipient is required to supply consideration; undisputed preexisting knowledge defeats claim as to 2013 Transaction (summary judgment for Commerzbank as to 2013), but genuine dispute exists as to novelty for 2014 (trial required) |
| Misappropriation of trade secrets | DAD Technology was a trade secret and was used by Commerzbank in breach of duty | IUDA expressly disclaims confidentiality for U.S. tax treatment/structure and prior disclosures to third parties extinguish secrecy; thus no trade secret | Court: Grants summary judgment to Commerzbank — the IUDA/tax-structure disclaimer and prior disclosures defeat trade-secret protection |
| Fraud (misrepresentation re: deal size) | Commerzbank misrepresented transaction size (150M) causing SCS damages and reliance | SCS unreasonably relied given contemporaneous doubts and failure to inquire; no reasonable reliance as a matter of law | Court: Grants summary judgment to Commerzbank — SCS’s reliance was unreasonable and fraud claim fails |
Key Cases Cited
- Joseph Martin, Jr., Delicatessen, Inc. v. Schumacher, 52 N.Y.2d 105 (N.Y. 1981) (agreement-to-agree doctrine)
- Nadel v. Play-By-Play Toys & Novelties, Inc., 208 F.3d 368 (2d Cir. 2000) (submission-of-idea requires novelty to recipient for contract recovery)
- Apfel v. Prudential-Bache Sec. Inc., 81 N.Y.2d 470 (N.Y. 1993) (novelty to buyer supplies consideration in idea-disclosure cases)
- Postlewaite v. McGraw-Hill, Inc., 411 F.3d 63 (2d Cir. 2005) (contracts must be read to effect general purpose)
- Ruckelshaus v. Monsanto Co., 467 U.S. 986 (U.S. 1984) (disclosure to unconstrained third parties extinguishes trade-secret protection)
- Briarpatch Ltd., L.P. v. Phoenix Pictures, Inc., 373 F.3d 296 (2d Cir. 2004) (elements of unjust enrichment under New York law)
- N. Atl. Instruments, Inc. v. Haber, 188 F.3d 38 (2d Cir. 1999) (trade-secret factors under New York law)