17-2469-cv 

HoldCo Asset Mgmt., L.P. v. Wells Fargo Bank, N.A.

 

UNITED STATES COURT OF APPEALS 

FOR THE SECOND CIRCUIT 

SUMMARY ORDER 

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A 

SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED 

BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. 

WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY 

MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE 

NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY 

OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL. 

 At a stated Term of the United States Court of Appeals for the Second Circuit, held at the 

Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York on the 

6th day of July, two thousand eighteen. 

Present: ROSEMARY S. POOLER, 

 REENA RAGGI, 

 PETER W. HALL, 

 Circuit Judges. 

 

_____________________________________________________ 

WELLS FARGO BANK, N.A., solely in its 

Capacity as Trustee for Soloso CDO 2005-1 

Ltd., 

 Plaintiff-Counter-Defendant-Appellee, 

 v. 17-2469-cv 

HOLDCO ASSET MANAGEMENT, L.P., 

HOLDCO OPPORTUNITIES FUND II, L.P., 

OPPORTUNITIES II LTD., 

 Defendants-Counter-Claimants-Appellants. 

_____________________________________________________ 

 

Appearing for Appellants: Jeffrey D. Sternklar (Seth B. McCormick, Brown McCormick 

LLC, on the brief), Boston, MA. 
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Appearing for Appellee: Michael M. Krauss, DLA Piper LLP (Peter J. Farrell, on the brief), 

Minneapolis, MN. 

Appeal from the United States District Court for the Southern District of New York (Forrest, J.). 

ON CONSIDERATION WHEREOF, IT IS HEREBY ORDERED, ADJUDGED, 

AND DECREED that the judgment of said District Court be and it hereby is AFFIRMED. 

 Appellants HoldCo Asset Management, L.P., HoldCo Opportunities Fund II, L.P., and 

Opportunities II Ltd. (collectively, “HoldCo”) appeal from the July 12, 2017 judgment of the 

District Court for the Southern District of New York (Forrest, J.) granting summary judgment to 

Appellee Wells Fargo Bank, N.A., denying summary judgment to HoldCo on Wells Fargo’s 

declaratory judgment action, and dismissing Holdco’s counterclaims. We assume the parties’ 

familiarity with the underlying facts, procedural history, and specification of issues for review. 

 Wells Fargo is the trustee of Soloso CDO 2005-1 Ltd., a special-purpose entity that 

issued collateralized debt obligations (“CDOs”) backed by investments in trust-preferred 

securities. See Lansuppe Feeder, LLC v. Wells Fargo Bank, No. 15-cv-7034, 2016 WL 5477741, 

at *1 (S.D.N.Y. Sept. 29, 2016) appeal docketed, No. 16-4061 (2d Cir. Dec. 2, 2016). 

Complying with the terms of Soloso’s indenture and an order of the Southern District of New 

York, Wells Fargo announced on November 18, 2015 that it would be selling off the collateral in 

Soloso’s trust estate in a series of five auctions. See id. at *6 (the court order). Through 

intermediaries, HoldCo submitted the highest bids for four of the securities that Soloso held as 

collateral at the fourth of these auctions. However, Wells Fargo, communicating through its 

liquidation agent Dock Street Capital Management LLC, declined to sell three of these assets to 

HoldCo. Wells Fargo had instructed Dock Street not to sell any of the collateral for less than a 

predetermined reserve price that Wells Fargo set for each asset, and HoldCo’s bids for these 

three securities fell below that price. 

 The primary issue we are called upon to determine is whether the terms on which the 

auction was held allowed Wells Fargo to decline HoldCo’s offer or whether it was bound to 

accept it. 

 An auction is a type of sale, and, like any sale, it is only complete when an offer has been 

accepted. In re NextWave Personal Communications, Inc., 200 F.3d 43, 60 (2d Cir. 1999) (“As 

in contract law more generally, a sale by auction is valid only upon offer and acceptance.”); 

N.Y.U.C.C. § 2-328; Restatement (Second) of Contracts § 28. New York follows the generally 

accepted practice of presuming that an auction is “with reserve,” meaning that an invitation to 

bid is an advertisement for prospective buyers to make offers to the seller, which the seller may 

freely accept or reject. See Drew v. John Deere Co. of Syracuse, 241 N.Y.S.2d 267, 269-70 (4th 

Dep’t 1963); NextWave, 200 F.3d at 60; see also 7 Am. Jur. 2d Auctions and Auctioneers § 34; 

N.Y.U.C.C. § 2-328(3); Uniform Land Transactions Act § 2-207(a); Restatement (Second) of 

Contracts § 28(1)(a). Under the “normal procedure,” then, “[t]here is no contract until the offer 

made by the bidder is accepted by the auctioneer’s ‘knocking down’ the property to him.” Drew, 

241 N.Y.S.2d at 269-70. A seller may, through “express statement,” modify the normal 

procedures. Id. at 270. If a seller clearly indicates that an auction is “without reserve” or 
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“absolute,” the invitation to bid functions as an offer to sell to the highest (qualified, bona-fide) 

bidder and bids are acceptances conditional on being the highest bid. Id. at 269; see also 7 Am. 

Jur. 2d Auctions and Auctioneers § 36. Conversely, a seller may declare that an auction is 

“conditional,” reserving her right to reject offers even after the bidding has closed. See Stonehill 

Capital Mgmt., LLC v. Bank of the West, 28 N.Y.3d 439, 449 (2016); 7 Am. Jur. 2d Auctions and 

Auctioneers § 34. 

 HoldCo claims that Wells Fargo’s invitation to bid expressly announced that the auction 

at issue was absolute. We disagree. The invitation to bid contains no language amounting to the 

“express statement” required by New York law to indicate an intent for an auction to proceed 

without reserve. Drew, 241 N.Y.S.2d at 270; see also Stonehill, 28 N.Y.3d at 451 (holding that a 

seller must send a “a forthright, reasonable signal” that “remove[s] any doubt of the parties’ 

intent” to hold an auction that does not function in the normal manner) (internal quotation marks 

omitted). “[F]ormulaic language,” such as that to which HoldCo points, will not do. Id. When the 

invitation to bid states that “[e]ach item of Collateral will be awarded only to the best bidder who 

is also a qualified bidder,” App’x at 380, it only recites the practice common to all auctions that 

the sale, if made at all, will be made to the highest qualified bidder. In New York, it is long 

established that “[t]he statement that the sale [will] be made to the highest bidder is not the 

equivalent of an announcement that the auction [will] be ‘without reserve.’” Drew, 241 N.Y.S.2d 

at 270. The mere fact that invitation to bid describes how the “winning bids shall be determined” 

without mentioning any discretionary determinations, App’x at 380, is not enough to make it 

clear that the standard practice of treating bids as offers will not apply. When the invitation to bid 

“specifically states...that ‘[u]nless otherwise specified, the Sale of each security will settle not 

later than on a T+3 basis (the ‘Settlement Date’),’” Appellants’ Br. at 20 (quoting App’x at 382), 

it only articulates a default term that will apply to the sale if made. 

 As the district court observed, this invitation to bid contains language that can be 

interpreted to affirmatively indicate an intent for the auction to proceed with reserve: “[t]he 

Trustee shall not be obligated to make any Sale and reserves the right to sell all or a part of the 

Collateral at a subsequent public or private Sale.” App’x at 380; see Wells Fargo Bank, N.A. v. 

HoldCo Asset Mgmt., L.P., No. 16-cv-6356, 2017 WL 2963501, at *8-11 (S.D.N.Y. July 11, 

2017). HoldCo urges a contrary interpretation of that language, construing it to mean that Wells 

Fargo reserves its right to cancel is not the sale of any individual piece of collateral at the auction 

but the auction itself. We are not persuaded. At best, HoldCo identifies textual ambiguity, which, 

operating against the background presumption of New York law, indicates that the auction was 

with reserve. 

 HoldCo posits that a New Jersey case created a test whereby a seller manifests an intent 

to conduct an auction without reserve whenever it “(i) calls for sealed bids; (ii) states that the 

item will sell to the highest bidder and (iii) states that it will be delivered on a date certain.” 

Appellants’ Br. at 17. Aside from the fact that we are applying New York and not New Jersey 

law, the New Jersey case HoldCo relies on, Golfinopoulous v. Padula, 218 N.J. Super. 38 (App. 

Div. 1987), does not actually announce that test. Golfinopoulous held only that an invitation to 

bid that stated that a “[c]ontract will definitely be awarded on [the date of the auction] to the 

highest responsible bidder” committed a seller to sell to the highest bidder. Id. at 46. The 
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decision said nothing about the importance (or not) of sealed bids or the importance (or not) of 

the date of delivery. 

 HoldCo also urges us to consider evidence it offers for the proposition that the custom in 

the CDO liquidation business is to reverse the generally applicable presumption, such that 

auctions proceed without reserve unless express language indicates otherwise. But the evidence 

it offers—assuming arguendo its admissibility—is not even evidence of a trade usage or custom. 

HoldCo’s evidence at best establishes that once CDO collateral is offered at auction, it nearly 

always sells. But there could be many reasons for this pattern that have nothing to do with 

industry customs. The evidence, as the district court rightly observed, “offers no way to mediate 

between an expectation that all collateral will trade because it usually does and an expectation 

that all collateral will trade because it must” according to the terms of the auction or the custom 

of the industry. Wells Fargo, 2017 WL 2963501, at *13. 

 We have considered the remainder of HoldCo’s arguments and find them to be without 

merit. Accordingly, the order of the district court hereby is AFFIRMED. 

 FOR THE COURT: 

 Catherine O’Hagan Wolfe, Clerk