**Author's Note: If you have reached this blog through a list that carries advertising, your computer may or may not be put at risk either through the list or through the advertising. I do not accept or authorize any commercial advertising of any kind on any list or post. Placing commercial advertisements with or near any of my web log posts is prohibited. Further, I do not recommend any products or services advertised with or near any of my posts or any list of my posts.**
This is an update of a post in this space on Tuesday, March 2, 2010.
The New York State Supreme Court decision denying MBIA's Motion to Dismiss came in the case of ABN Amro Bank N.V. v. MBIA Inc. (New York Supreme Court, New York County, Case No. 601475-2009, Opinion Filed February 17, 2010). Here is a link to the 41-page unofficially reported decision by the New York State Supreme Court denying MBIA's Motion to Dismiss on February 17, 2010. It is also reported as ABN Amro Bank N.V. v. MBIA Inc., 26 Misc. 3d 1223(A), 2010 WL 549074 (N.Y. Sup. Ct., N.Y. County, Opinion Filed February 17, 2010)(subscription required to access Westlaw).
Several of the holdings in this Opinion are of interest. First, the Court rejected any contention that the action of the New York State Insurance Superintendent in approving MBIA's restructuring plan had the effect of preempting any of the causes of action alleged by the Plaintiffs in this case. A private right of action under the New York State Debtor and Creditor Law and common law "is not inconsistent with the mechanisms chosen by the Legislature to regulate the industry under the state's Insurance Laws. The mere fact that there was earlier approval of the MBIA restructuring by the Insurance Department does not immunize defendants from subsequent statutory and common law claims." Id. at pp. 26-27 of the attached unofficially reported Opinion; ABN Amro Bank N.V. v. MBIA Inc., 2010 WL 549074 *9 (N.Y. Sup. Ct., N.Y. County, Opinion Filed February 17, 2010).
The Court then turned its attention to the legal sufficiency of each of the six causes of action alleged, stating: "At the outset, it is important to highlight once again that the motion pending before the Court, is a pre-discovery motion to dismiss, not a post-discovery motion for summary judgment." Id. at 32; ABN Amro Bank N.V. v. MBIA Inc., 2010 WL 549074 *11 (N.Y. Sup. Ct., N.Y. County, Opinion Filed February 17, 2010).
That said, the New York Court denied MBIA's Motion to Dismiss a cause of action based upon allegations that MBIA breached an Implied Covenant of Good Faith and Fair Dealing. To say again, the transactions between the Plaintiffs and MBIA arose before MBIA filed for reorganization and, with the permission of the New York State Insurance Department, split into two companies, one of which is now named National Public Finance Guarantee Corporation and which allegedly received all the assets that formerly belonged to MBIA in the restructuring; the other company was still named MBIA and it held the Plaintiffs' obligations but, allegedly, no assets with which to pay them.
In the course of denying MBIA's Motion to Dismiss the alleged cause of action for Breach of the Implied Covenant of Good Faith and Fair Dealing, the New York Supreme Court applied what the Court described as settled New York law to the effect that no accompanying Breach of Contract is required in order for there to be a Breach of the Implied Covenant. Id. at page 37 of the attached unofficially reported Opinion; ABN Amro N.V. v. MBIA Inc., 2010 WL 549074 *13 (N.Y. Sup. Ct., N.Y. County, Opinion Filed February 17, 2010). This is at odds with the judicial decisions in many other States, which require an accompanying Breach of the express Contract in order for there to be a Breach of the Implied Covenant.
In addition, in pertinent part the Court denied MBIA's Motion to Dismiss a cause of action for alleged Unjust Enrichment. The Court in this case held: "The critical inquiry in an action for unjust enrichment is whether it is against equity and good conscience to permit the defendant to retain what is sought to be recovered." Id. at 39; ABN Amro N.V. v. MBIA Inc., 2010 WL 549074 *13 (N.Y. Sup. Ct., N.Y. County, Opinion Filed February 17, 2010).
Actions for alleged Breach of the Implied Covenant of Good Faith and Fair Dealing are addressed in Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" § 2:7 (Second Edition Shepard's/McGraw-Hill, 2009 Supplement West Publishing Company), and Unjust Enrichment is discussed in id. § 7:16, among other Sections. Preemption of Statutory Bad Faith Claims is addressed in particular in §§ 9:15, 9:16, and 13:1, among others.
Please Read The Disclaimer.