Syncora Guarantee Inc. v. HSBC México, S.A.
861 F. Supp. 2d 252
S.D.N.Y.2012Background
- Syncora initiated ICC arbitration against Omega on July 8, 2011 over the Insurance Agreement and Premium Letter; Syncora later sued HSBC in SDNY on August 1, 2011 seeking relief for alleged failure to pay premiums.
- Omega filed counterclaims in the ICC arbitration for fraudulent inducement, breach of contract, and breach of implied covenant; Omega alleges Syncora failed to disclose risks related to its CDO/RMBS investments and that NYID ordered suspension of payments.
- HSBC filed counterclaims against Syncora in SDNY mirroring Omega’s ICC claims, including fraudulent inducement and breach-related theories tied to nonpayment and alleged misrepresentations.
- Syncora sought Court-directed delivery of trust assets to the Court under CPLR 2701, arguing HSBC held assets as trustee for Syncora under the Insurance Agreement.
- The Court denied the CPLR 2701 relief, held that arbitration and stay motions were the primary issues, and granted in part HSBC’s motion to compel arbitration and stay, while denying judgment on the pleadings without prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Syncora’s claims are arbitrable under the Trust Agreement. | Syncora bound by Trust Agreement arbitration; non-signatory Syncora estopped. | Trust Agreement requires arbitration for disputes arising thereunder; Syncora is bound. | Trust Agreement claims are arbitrable. |
| Whether Syncora’s claims are arbitrable under the Insurance Agreement. | Claims relate to payment of premiums and fall within 8.9(i) exception. | Broad 8.9(a) arbitration clause governs; 8.9(i) narrow exception is not unambiguously applicable. | Breach of fiduciary duty occurs within Insurance Agreement scope; arbitration compelled for applicable claims. |
| Whether a stay of SDNY proceedings is warranted pending arbitration. | Stays unnecessary; separate forums for different relief. | Arbitrable and non-arbitrable issues so parallel that a stay avoids duplication and conflict. | Stay granted for arbitrable claims; non-arbitrable issues may proceed. |
| Whether Syncora’s CPLR 2701 assets relief should be granted given ownership of funds. | HSBC holds assets as trustee for Syncora; funds should be deposited in Court. | HSBC not trustee; funds not due to Syncora; relief premature. | CPLR 2701 relief denied as premature. |
Key Cases Cited
- In re American Express Financial Advisors Sec. Litigation, 672 F.3d 113 (2d Cir. 2011) (arbitrability guidance; doubts resolved in favor of arbitration)
- WorldCrisa Corp. v. Armstrong, 129 F.3d 71 (2d Cir. 1997) (broad arbitration scope; non-signatory estoppel principles)
- Roso-Lino Beverage Distribs., Inc. v. Coca-Cola Bottling Co. of New York, 749 F.2d 124 (2d Cir. 1984) (narrow arbitration carve-out must be unambiguous)
- Deloitte Haskins & Sells v. Deloitte Noraudit A/S, 9 F.3d 1060 (2d Cir. 1998) (nonsignatories bound to arbitrate where contract benefits flow)
- Wire Service Guild, Local 222, Newspaper Guild, AFL-CIO v. United Press Int’l, Inc., 623 F.2d 257 (2d Cir. 1980) (contract language excluding arbitration must be clear and unambiguous)