Case Information
*1 Before: JACOBS, POOLER, Circuit Judges, and CRAWFORD, District Judge. [*]
*2 A group of hotel-related businesses, along with their investor and guarantors, appeal the dismissal of their fraud claims against the Royal Bank of Scotland and two of its subsidiaries. As to the hotel plaintiffs, the United States District Court for the Southern District of New York (Furman, J.) ruled that, because they had failed to list their cause of action in a schedule of assets in their now-concluded bankruptcy proceeding, they lacked standing to bring the claim and were barred by judicial estoppel. The claims of the investor and guarantors were dismissed as untimely and barred by the law of the case. We affirm on the grounds of judicial estoppel and timeliness.
JOHN SIEGAL (Dominic A. Gentile and Thomas D. Warren on the brief), Baker Hostetler LLP, New York, NY, for Plaintiffs-Appellants.
DAVID SAPIR LESSER (Jamie S. Dycus, Colin Reardon, and Ryan D. Tansey on the brief), Wilmer Cutler Pickering Hale and Dorr LLP, New York, NY, for Defendants- Appellees.
DENNIS JACOBS, Circuit Judge:
A group of hotel-related businesses, along with their investor and guarantors, appeal the dismissal of their fraud claims against the Royal Bank of Scotland and two of its subsidiaries. As to the hotel plaintiffs, the United States District Court for the Southern District of New York (Furman, J.) ruled that, because they had failed to list their cause of action in a schedule of assets in their now-concluded bankruptcy proceeding, they lacked standing to bring the claim and were barred by judicial estoppel. The claims of the investor and guarantors were dismissed as untimely and barred by the law of the case. We affirm on the grounds of judicial estoppel and timeliness.
I
BPP Illinois, LLC, as one of a consortium of single-purpose entities that
own and manage hotels (collectively “BPP”), together with corporate affiliates of
BPP that guaranteed a loan taken out by BPP (the “FFC Plaintiffs”), and an
investor of BPP (the “Equity Plaintiff”), allege that the defendants--the Royal
Bank of Scotland Group PLC (“RBS”) and two of its subsidiaries, RBS Citizens,
N.A. (“RBS Citizens”) and the Citizens Bank of Pennsylvania (“Citizens Bank”)--
fraudulently induced BPP to enter a loan agreement with Citizens Bank, and that
the loan eventually pushed BPP into bankruptcy. The district court initially
dismissed the fraud and related claims against BPP on the ground that they were
untimely under the applicable statute of limitations, and dismissed the claims
against the FFC Plaintiffs and the Equity Plaintiff for failure to plead fraud with
sufficient particularity. In a previous appeal, we vacated the judgment as to BPP,
and affirmed with respect to the other plaintiffs. BPP Illinois, LLC v. Royal Bank
of Scotland Grp. PLC,
the FFC Plaintiffs and Equity Plaintiff was properly denied as untimely.
We review de novo a grant of a motion to dismiss, “accept[ing] as true the
factual allegations made in the complaint and draw[ing] all inferences in favor of
the plaintiffs.” Grandon v. Merrill Lynch & Co.,
II
In 2008, BPP borrowed $66 million from Citizens Bank to finance the purchase of several hotel properties. The transaction was a loan-and-swap arrangement. The loan component required BPP to pay Citizens Bank interest at 1.65% above the U.S. Dollar London Interbank Offered Rate (“LIBOR”). The [2] swap required Citizens Bank to pay LIBOR to BPP, and required BPP to pay interest to Citizens Bank at 3.1625%. The net effect of the loan and swap was that BPP paid Citizens Bank a fixed interest rate of approximately 4.8%.
In 2010, BPP filed for bankruptcy in the Eastern District of Texas. BPP’s schedule of its assets, including legal claims, never listed claims against RBS or RBS Citizens, nor did it include claims against Citizens Bank on the basis of alleged LIBOR manipulation.
While the bankruptcy proceeding was ongoing, there were indications that RBS might be implicated in an improper manipulation of LIBOR. Media entities reported that government regulators were investigating possible manipulation of LIBOR. And on May 6, 2011, RBS disclosed that it was cooperating with investigations. By August 2011, numerous lawsuits alleging LIBOR manipulation had been filed against different banks, including RBS.
On October 4, 2011, the bankruptcy court confirmed BPP’s bankruptcy plan of reorganization. And on November 15, 2012, the bankruptcy court ordered the proceeding closed. BPP had still not disclosed any claim relating to LIBOR manipulation.
III
“The doctrine of judicial estoppel prevents a party from asserting a factual
position in one legal proceeding that is contrary to a position that is successfully
advanced in another proceeding.” Rodal v. Anesthesia Grp. of Onondaga, P.C.,
“[T]he exact criteria for invoking judicial estoppel will vary based on
‘specific factual contexts.’” Adelphia Recovery Trust v. Goldman, Sachs & Co.,
A. Inconsistency
. The district court found that BPP advanced
incompatible positions in separate judicial proceedings, having first failed to list a
LIBOR-fraud claim against Citizens Bank in BPP’s bankruptcy proceeding in the
Eastern District of Texas, and having then asserted such a claim in the Southern
District of New York after the bankruptcy proceeding closed. Because the
bankruptcy proceeding was conducted in Texas, we look to Fifth Circuit law for
the limited purpose of deciding whether BPP’s failure to list a LIBOR-fraud claim
in the bankruptcy proceeding is equivalent to an assertion that BPP did not have
such a claim. It is. See In re Coastal Plains, Inc.,
In the Fifth Circuit, the duty of a bankruptcy debtor to list a potential cause
of action in its schedule of assets appears to depend in part on
when
the debtor
*6
gains sufficient notice of the potential cause of action. Cf. Byrd v. Wyeth, Inc.,
The Fifth Circuit has recognized “that the Bankruptcy Code and Rules
impose upon bankruptcy debtors an express, affirmative duty to disclose all
assets, including contingent and unliquidated claims.” In re Coastal Plains, 179
F.3d at 207-08 (5th Cir. 1999) (emphasis omitted). Therefore, “a debtor is required
to disclose all potential causes of action.” Id. at 208 (quoting Youngblood Grp. v.
Lufkin Fed. Sav. & Loan Ass’n,
The debtor need not know all the facts or even the legal basis for the cause of action; rather, if the debtor has enough information . . . prior to confirmation to suggest that it may have a possible cause of action, then that is a “known” cause of action such that it must be disclosed.
Id. (quoting Youngblood,
Like other courts, the Fifth Circuit thus recognizes that “the
integrity of the
bankruptcy system depends on full and honest disclosure by debtors of all of their assets
.”
Id. (emphasis in original) (quoting Rosenshein v. Kleban,
Prior to confirmation of the bankruptcy plan in October 2011, sufficient
information was available to BPP to require listing a potential cause of action
*7
against the defendants based on LIBOR fraud. For example, in May 2011, RBS
publicly disclosed in a Form 6-K filing that U.S. and European regulators were
“conducting investigations” into LIBOR manipulation, and that “RBS Group is
co-operating with these investigations.” J. App’x at 540. On the previous appeal
to this Court, BPP’s brief stated that BPP “did not have notice of fraud
by RBS
until RBS made a public disclosure in May 2011 that it had been implicated in
LIBOR fraud.” Br. for Plaintiffs-Appellants at 23, BPP Illinois, LLC v. Royal Bank
of Scotland Grp. PLC,
Moreover, numerous news articles had reported on the possibility of
LIBOR fraud before the bankruptcy plan had been confirmed, some of them
years before. The district court found that by May 2008, “there were at least
seven articles in major publications reporting that there was substantial evidence
to support the conclusion that LIBOR was artificially low and had been so for
some time.” BPP Illinois, LLC v. Royal Bank of Scotland Grp., PLC, No. 13 Civ.
0638 (JMF),
*8 Furthermore, RBS had been sued for LIBOR manipulation (by others) before the plan had been confirmed. See, e.g., Compl. ¶¶ 13, 22, 33, 99, Ravan Invs., LLC v. Bank of Am. Corp., No. 11-cv-3249 (S.D.N.Y. filed May 13, 2011); Compl. ¶¶ 1, 5-7, FTC Capital GMBH v. Credit Suisse Grp. AG, No. 11-cv-2613 (S.D.N.Y. filed Apr. 15, 2011). These lawsuits suggest that BPP should have known sufficient facts to include a possible LIBOR-fraud claim against RBS on its list of assets.
Accordingly, under Fifth Circuit law, the kind of LIBOR-fraud claim that
BPP seeks to assert now was “a ‘known’ cause of action” at the time of
confirmation, so that BPP’s failure to list it in the schedule of assets is equivalent
to a representation “that none exist[s].” In re Coastal Plains,
to cases in which “the party asserting the two positions would derive an unfair
advantage against the party seeking estoppel.” In re Adelphia Recovery Trust,
appeal, controlled by Fifth Circuit bankruptcy precedents, the question is
whether “the debtor has enough information prior to confirmation to suggest
that it may have a possible cause of action.” In re Coastal Plains,
IV
The FFC Plaintiffs and Equity Plaintiff appeal the district court’s decision denying their request for leave to amend. We affirm the district court’s decision on the ground of timeliness.
“Where . . . a scheduling order governs amendments to the complaint,”
and a plaintiff wishes to amend after the deadline to do so has passed, the
plaintiff must show good cause to modify the deadline under Rule 16. Holmes v.
Grubman,
Second, plaintiffs cite the district court’s local rule. The rule provided that
if, after a motion to dismiss, “the plaintiff elects not to amend its pleading, no
further opportunities to amend to address the deficiencies identified by the
motion to dismiss will be granted.” Appellant’s Br. at 44 n.6. By its terms, the
rule does not address the situation here, where the plaintiffs
did
amend their
complaint in response to a motion to dismiss. We review a district court’s
decision to deny leave to amend based on a violation of a scheduling order for
abuse of discretion, Grochowski,
Last, plaintiffs argue that the court was aware of the facts needed to make their pleadings state a claim, even though those facts were not actually in the pleadings. This argument is meritless. Rule 9(b) creates a pleading standard, not an evidentiary standard. See, e.g., United States ex rel. Ladas v. Exelis, Inc., 824 F.3d 16, 25-26 (2d Cir. 2016) (“To satisfy this Rule, a complaint alleging fraud must ‘(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent.’” (emphasis added)). A deficient complaint cannot be justified because the parties or the court knew the facts that should have been alleged.
In sum, plaintiffs have not shown good cause for an untimely amendment, and the district court properly denied leave to amend.
CONCLUSION
For the foregoing reasons, the judgment of the district court is affirmed.
Notes
[*] Judge Geoffrey W. Crawford, of the United States District Court for the District of Vermont, sitting by designation.
[1] Since judicial estoppel bars BPP’s suit, we resolve this case without
adjudicating the merits, and need not consider standing. “[A] federal court has
leeway to choose among threshold grounds for denying audience to a case on the
merits.” Sinochem Int’l Co. v. Malaysia Int’l Shipping Corp.,
[2] LIBOR is a commonly used interest rate benchmark. Each day, the British Bankers’ Association announces the current LIBOR rate, which is calculated based on information provided by a panel of banks that includes RBS.
[3] In the previous appeal in this case, we stated that the district court had acted
“too hastily” in concluding, based in part on these newspaper reports, that BPP
should have been aware of its potential LIBOR-fraud claims. BPP Illinois, 603 F.
App’x at 58-59. In that appeal, however, we considered a different question
under a different body of law. The issue was whether BPP had sufficient inquiry
notice under the relevant Pennsylvania statute of limitations. Id. That question
turned on when the plaintiff “reasonably should [have] know[n] that he ha[d]
been injured and that his injury ha[d] been caused by another party’s conduct.”
Id. at 58 (quoting Crouse v. Cyclops Indus.,
[4] Sometimes we impose an additional condition, requiring the impact “of
inconsistent results . . . on judicial integrity [to be] certain.” In re Adelphia
Recovery Trust,