[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

________________________

No. 12-11815

________________________

D.C. Docket Nos. 1:09-md-02106-ASG, 1:09-cv-23835-ASG

AVENUE CLO FUND, LTD.,

et. al.,

 Plaintiffs,

AVENUE CLO IV, LTD., 

AVENUE CLO V, LTD.,

AVENUE CLO VI, LTD.,

BRIGADE LEVERAGED CAPITAL STRUCTURES FUND, LTD.,

BATTALION CLO 2007-I LTD., 

CASPIAN CAPITAL PARTNERS, L.P., 

CASPIAN SELECT CREDIT MASTER FUND, LTD., 

ING PRIME RATE TRUST, 

ING SENIOR INCOME FUND, 

ING INTERNATIONAL (II) -SENIOR BANK LOANS EURO,

ING INVESTMENT MANAGEMENT CLO I, LTD., 

ING INVESTMENT MANAGEMENT CLO II, LTD., 

ING INVESTMENT MANAGEMENT CLO III, LTD., 

ING INVESTMENT MANAGEMENT CLO IV, LTD., 

ING INVESTMENT MANAGEMENT CLO V, LTD.,

VENTURE II CDO 2002, LIMITED, 

VENTURE III CDO LIMITED, 

VENTURE IV CDO LIMITED, 

VENTURE V CDO LIMITED, 

VENTURE VI CDO LIMITED, 

VENTURE VII CDO LIMITED, 

VENTURE VIII CDO LIMITED, 

VENTURE IX CDO LIMITED,

VISTA LEVERAGED INCOME FUND, 

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2

VEER CASH FLOW CLO, LIMITED,

MARINER LDC, 

GENESIS CLO 2007-1 LTD., 

CANPARTNERS INVESTMENTS IV, LLC, 

SCROGGIN CAPITAL MANAGEMENT II, 

SCROGGIN INTERNATIONAL FUND LTD., 

SCROGGIN WORLDWIDE FUND LTD., 

CASPIAN ALPHA LONG CREDIT FUND, L.P.,

SOLA LTD, 

MONARCH MASTER FUNDING, LTD., 

SOLUS CORE OPPORTUNITIES MASTER FUND LTD.,

CANTOR FITZGERALD SECURITIES, 

OLYMPIC CLO I, LTD., 

SHASTA CLO I, LTD., 

WHITNEY CLO I LTD., 

SAN GABRIEL CLO I LTD., 

SIERRA CLO II LTD., 

NORMANDY HILL MASTER FUND, L.P., 

SPCP GROUP, LLC, 

VENURE CAPITAL MASTER FUND, LTD., 

 Plaintiffs - Appellants,

versus

SUMITOMO MITSUI BANKING CORPORATION,

et al.,

 Defendants,

BANK OF AMERICA, NA, 

 Defendant - Appellee.

________________________

Appeal from the United States District Court

for the Southern District of Florida

________________________

 (July 26, 2013)

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Before TJOFLAT and MARTIN, Circuit Judges, and BUCKLEW, * District Judge.

MARTIN, Circuit Judge: 

This case is one of many resulting from the failure of the project to build a 

Fontainebleau Resort in Las Vegas. The Fontainebleau Las Vegas was a hotel and 

casino development project on an approximately 24.4 acre parcel at the north end 

of the Las Vegas Strip. Here, a group of lenders and their successors in interest 

(Term Lenders) appeal the District Court’s grant of summary judgment in favor of 

Bank of America. See In re Fontainebleau Las Vegas Contract Litigation MDL 

No. 2106, No. 09-MD-02106-CIV, 2012 WL 930290, *1 (S.D. Fla. March 19, 

2012). After careful review, and with the benefit of oral argument, we affirm in 

part, reverse in part, and remand for further proceedings consistent with this 

opinion. 

I. FACTUAL BACKGROUND

This case is a contract dispute related to the funding of the development of 

the Fontainebleau Las Vegas (the Project). See In re Fontainebleau, 2012 WL 

930290, at *1–49. On one side of the dispute are the Term Lenders, which loaned 

money to Fontainebleau Las Vegas, LLC and Fontainebleau Las Vegas II, LLC 

(the Borrowers). The Borrowers’ parent company, Fontainebleau Resorts, LLC, 

was the developer of the Fontainebleau Las Vegas. On the other side of the 

 * Honorable Susan C. Bucklew, United States District Judge for the Middle District of Florida, 

sitting by designation.

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dispute is Bank of America, which was the Disbursement Agent responsible under 

the funding agreements for disbursing the Term Lenders’ funds to the Borrowers. 

A. THE FUNDING STRUCTURE

At the beginning, the Project’s budget was $2.9 billion, with $1.85 billion to 

be funded by a senior secured debt facility (Senior Credit Facility).1 The Senior 

Credit Facility was set up by the Credit Agreement and consisted of three 

components: a $700 million Initial Term Loan Facility; a $350 million Delay Draw 

Term Loan Facility; and an $800 million Revolving Loan Facility. 

The Term Lenders own Initial Term Loan and Delay Draw Term Loan 

notes. The Initial Term Loans were due on the closing date. The Delay Draw 

Term Loans and Revolving Loans were disbursed on a periodic basis under the 

terms of the Disbursement Agreement. Bank of America was the Disbursement 

Agent responsible for distributing the funds under the terms of the Disbursement 

Agreement. 

B. DISPERSING THE MONEY

The process set up for the Borrowers to get the money had a lot of moving 

parts. The Credit Agreement required the Borrowers to first submit a Notice of 

Borrowing to the Administrative Agent (Bank of America). This would prompt 

 1 The balance of the Project was funded by a $675 million Second Mortgage Note offering and a 

$400 million Retail Facility. The Retail Facility was the sole source of funding for the retail 

portion of the Fontainebleau Las Vegas. The resort budget included $83 million in costs that 

were to be funded through the Retail Facility. 

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the Term Lenders and/or Revolving Lenders to give the money to the 

Administrative Agent. If the Notice of Borrowing included the proper information 

and the Borrowers submitted no more than one Notice per month, the 

Administrative Agent would transfer the loan funds into the Bank Proceeds 

Account. One difference between the Delay Draw Term Loans and Revolving 

Loans was that “the proceeds of each Delayed Draw Term Loan [was] applied first

to repay in full any then outstanding Revolving Loans . . . and second, to the extent 

of any excess, [was] credited to the Bank Proceeds Account.” 

Once funds were in the Bank Proceeds Account, the Borrowers had to 

submit another request, called the Advance Request, which included a series of 

general representations and certifications, to the Disbursement Agent (Bank of 

America). When it received the Advance Request, Bank of America, as

Disbursement Agent, as well as the Construction Consultant were required to 

review the Advance Request and determine whether all the required documentation 

was provided. The Construction Consultant was also required to deliver a 

certificate to Bank of America either approving or disapproving the Advance 

Request. 

Under the Disbursement Agreement, the next step turned on whether the 

conditions precedent set forth in Article 3 of the Disbursement Agreement were 

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satisfied.2 If the conditions precedent were met, Bank of America, in its role as

Disbursement Agent, was required to execute an Advance Confirmation Notice 

and the funds would be disbursed to the Borrowers. If, on the other hand, the 

conditions precedent were not met then Bank of America was required to issue a 

Stop Funding Notice. Bank of America’s duties as Disbursement Agent, with 

respect to determining whether the conditions precedent were or were not satisfied,

is one of the disputes between the parties that will be the subject of our discussion 

in Part IV.A of this Order.

C. MONEY DISPERSED DURING THE TIME IN DISPUTE

For each Advance Request from September 2008 through March 2009, Bank 

of America, as Disbursement Agent, received the required Advance Request 

certifications from the Borrowers, the Construction Consultant, the contractor, and 

the architect. Throughout this period Bank of America continued to disburse funds 

to the Borrowers and never issued a Stop Funding Notice. 

However, the Term Lenders have pointed to a number of events, beginning 

in September 2008, which they say “caused the failures of multiple conditions 

precedent.” They delineate these events as: “the Lehman bankruptcy and the 

 2 The conditions included, for example, that “[n]o Default or Event of Default shall have 

occurred and be continuing”; “there shall not have occurred any change in the economics or 

feasibility of constructing and/or operating the Project, or in the financial condition, business or 

property of Fontainebleau, any of which could reasonably be expected to have a Material 

Adverse Effect”; and “the Retail Agent and the Retail Lenders shall . . . make any Advances 

required of them.” Other conditions that the parties believe are relevant to this case are set forth 

in §§ 3.3.2, 3.3.8, 3.3.21, and 3.3.24 of the Disbursement Agreement. 

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funding of the Retail Facility; Fontainebleau’s failure to disclose anticipated 

Project costs; repudiation by the FDIC of First National Bank of Nevada’s 

commitments; select lenders’ failure to fund with respect to the March 2009 

Advance; and the ‘untimely’ submission of the March 2009 Advance.” See In re 

Fontainebleau, 2012 WL 930290, at *15. How much Bank of America knew about 

these events is another source of dispute between the parties. That dispute will be 

the subject of our discussion in Part IV.B of this Order.

In April 2009, the “Total Revolving Commitments” were ended because the 

Revolving Lenders determined that there had been Events of Default. In May 

2009, Bank of America commissioned a “cost-complete review” of the Project, 

which revealed that Fontainebleau had been concealing cost overruns. Finally, on 

June 9, 2009, the Borrowers and some of their affiliates filed for bankruptcy. 

II. PROCEDURAL HISTORY

On January 15, 2010, the Term Lenders filed a Second Amended Complaint 

alleging, as relevant to this appeal, that Bank of America breached the 

Disbursement Agreement.3

 Following discovery, the parties filed cross-motions

for summary judgment. 

 3 The Complaint also alleged breach of the Credit Agreement, breach of the implied covenant of 

good faith and fair dealing, and requested declaratory relief. 

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The District Court granted summary judgment in favor of Bank of America 

because it determined that “the Term Lenders, with all inferences in their favor, 

have failed to raise a genuine issue of material fact as to whether Bank of America, 

as Disbursement Agent or Bank Agent, breached the Disbursement Agreement, or 

whether Bank of America acted with bad faith, gross negligence, or willful 

misconduct.” In re Fontainebleau, 2012 WL 930290, at *26. In reaching that 

conclusion, the District Court made several preliminary findings. First, the District 

Court held that “[i]n determining whether the conditions precedent to an Advance 

Request were satisfied, Bank of America was explicitly authorized to rely on 

Fontainebleau’s certifications . . . and was explicitly not required to conduct ‘any 

independent investigation as to the accuracy, veracity, or completeness’ of those 

certifications.” Id. at *28. Second, the District Court determined that “Bank of 

America, as Disbursement Agent, did not act in bad faith or with gross negligence 

or willful misconduct in performing its duties under the Disbursement Agreement.” 

Id. at *34. Third, the District Court found that there was no evidence on summary 

judgment that Bank of America breached the Disbursement Agreement by 

disbursing funds despite having actual knowledge that a condition precedent was 

not satisfied. Id. at * 35. 

The Term Lenders timely filed a Notice of Appeal on March 22, 2012.

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III. STANDARD OF REVIEW

“This Court reviews the granting of summary judgment de novo, applying 

the same legal standards which bound the district court.” Whatley v. CNA Ins. 

Companies, 189 F.3d 1310, 1313 (11th Cir. 1999). “Summary judgment is 

appropriate only when there is no genuine issue as to any material fact and . . . the 

moving party is entitled to a judgment as a matter of law.” Id. (quotation marks 

omitted). “An issue of fact is material if it ‘might affect the outcome of the suit 

under governing law’” and it is “genuine ‘if the evidence is such that a reasonable 

jury could return a verdict for the nonmoving party.’” Western Grp. Nurseries, 

Inc. v. Ergas, 167 F.3d 1354, 1360 – 61 (11th Cir. 1999) (quoting Anderson v. 

Liberty Lobby, Inc., 466 U.S. 242, 248, 106 S. Ct. 2505, 2510 (1986)). 

All “evidence must be viewed in the light most favorable to the party 

opposing the motion for summary judgment.” Blackston v. Shook and Fletcher 

Insulation Co., 764 F.2d 1480, 1482 (11th Cir. 1985). The Court “must avoid 

weighing conflicting evidence or making credibility determinations.” Stewart v. 

Booker T. Washington Ins., 232 F.3d 844, 848 (11th Cir. 2000). “All reasonable 

inferences arising from the undisputed facts should be made in favor of the 

nonmovant, but an inference based on speculation and conjecture is not 

reasonable.” Blackston, 764 F.2d at 1482 (internal citation omitted). 

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IV. DISCUSSION

In its appeal, the Term Lenders argue that the District Court erred in 

granting summary judgment to Bank of America because: 1) it based its 

determination on a misunderstanding of Bank of America’s duties under the 

Disbursement Agreement; 2) there remain genuine issues of material fact about

whether Bank of America breached the Disbursement Agreement; and 3) there 

remain genuine issues of material fact about whether Bank of America was grossly 

negligent. We will discuss each of these issues in turn. 

A. BANK OF AMERICA’S DUTIES UNDER THE DISBURSEMENT 

AGREEMENT

In ruling on the summary judgment motion, the District Court necessarily 

had to determine what Bank of America’s duties were under the relevant portions 

of the Disbursement Agreement. Both parties agree that if the conditions 

precedent were satisfied, Bank of America was supposed to deliver an Advance 

Confirmation Notice so that the Term Lenders’ funds could be disbursed to the 

Borrowers. Both parties also agree that if any of the relevant conditions precedent 

were not satisfied Bank of America was required to issue a Stop Funding Notice. 

The parties disagree, however, on whether Bank of America had an affirmative 

duty to determine that the conditions precedent were satisfied or whether Bank of 

America was permitted to rely on the Borrowers’ certifications that the conditions 

precedent were satisfied unless it had actual knowledge to the contrary. 

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The District Court determined that “[t]he Disbursement Agreement imposed 

on Bank of America no duty to inquire or investigate whether [the Borrower’s] 

representations that all conditions precedent had been met were accurate.” In re 

Fontainebleau, 2012 WL 930290, at *48. For the reasons set out here, we agree 

with this determination. 

“Under New York Law, the initial interpretation of a contract is a matter of 

law for the court to decide.” Alexander & Alexander Servs., Inc. v. These Certain 

Underwriters at Lloyd’s, London, 136 F.3d 82, 86 (2d Cir. 1998) (quotation marks 

omitted).

4 A court must enforce a contract provision that is “complete, clear and 

unambiguous on its face . . . according to the plain meaning of the terms.” 

Greenfield v. Phillies Records, Inc., 780 N.E.2d 166, 170 (N.Y. 2002). When 

interpreting a contract, a court should look at the whole agreement and try to give 

meaning to all of the contract’s provisions. See RLI Ins. Co. v. Smiedala, 947 

N.Y.S.2d 850, 853 (App. Div. 2012). But, in the face of any inconsistency 

between a general provision and specific provisions, the specific provisions 

prevail. See Muzak Corp. v. Hotel Taft Corp., 133 N.E.2d 688, 690 (N.Y. 1956). 

The specific provision of the Disbursement Agreement that most directly 

addresses this issue is § 9.3.2. That section explains that:

Notwithstanding anything else in this Agreement to the contrary, in 

performing its duties hereunder, including approving any Advance 

 4 The Disbursement Agreement says that it is to be governed by New York law. [D.A. § 11.6]

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Requests . . . the Disbursement Agent shall be entitled to rely on 

certifications from the Project Entities . . . as to the satisfaction of any 

requirements and/or conditions imposed by this Agreement. 

The clear language of this provision supports Bank of America’s interpretation of 

its duties under the Disbursement Agreement: Bank of America had to determine 

that the conditions precedent were satisfied, but in doing so it was permitted to rely 

on the Borrower’s certifications. 

Bank of America, as Disbursement Agent, would not have been permitted to 

rely on the Borrowers’ certifications that the conditions precedent were met if it 

had actual knowledge to the contrary. If Bank of America actually knew that a 

condition precedent was not satisfied, it would not be commercially reasonable to 

interpret the Agreement to allow Bank of America to disregard that knowledge by 

pointing to a certification by the Borrower, which it knows to be false. See In re 

Lipper Holdings, LLC, 766 N.Y.S.2d 561, 562 (App. Div. 2003) (explaining that a 

contract “should not be interpreted to produce a result . . . commercially 

unreasonable, or contrary to the reasonable expectations of the parties” (internal 

citations omitted)). 

However, if Bank of America merely had information that was inconsistent 

with the Borrowers’ certification, it did not have an affirmative duty to determine 

whether the condition precedent was actually satisfied. Section 9.3.2 does not 

include any language requiring Bank of America, as Disbursement Agent, to verify 

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the accuracy of the Borrowers’ certifications. Instead, immediately following the 

language quoted above, § 9.3.2 includes language suggesting that the opposite is 

true: 

The Disbursement Agent shall not be required to conduct any 

independent investigation as to the accuracy, veracity or 

completeness of any such items . . . . 

In addition, according to § 9.10 of the Agreement, “nothing in this Agreement . . . 

shall be so construed as to impose” obligations on Bank of America “except as 

expressly set forth herein.” 

Under this interpretation of Bank of America’s duties as Disbursement 

Agent, Bank of America would still have to determine whether each condition 

precedent was satisfied if it did not have a certification it could rely on. For 

example, as the Term Lenders point out, there are some conditions for

disbursement that the Borrowers could not certify, such as the condition in 

§ 3.3.24, requiring that the Bank Agent “receive[] such other documents and 

evidence as are customary . . . as the Bank Agent may reasonably request.” Also, 

it is not hard to imagine a circumstance in which the Borrowers chose not to give

such a certification or where Bank of America had actual knowledge that the 

certification was false. In situations like these, § 9.3.2 would play no role because 

there would be no certification Bank of America, as Disbursement Agent, could 

rely on when determining whether the condition precedent was satisfied. It is 

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under these circumstances that other provisions of the Agreement – such a § 9.2.1, 

giving Bank of America the right to review information supporting the Advance 

Requests, and § 2.5.1, requiring that Bank of America “specify, in reasonable 

detail, the conditions precedent which [it] has determined have not been satisfied”

– would have had more relevance

B. DID BANK OF AMERICA BREACH THE DISBURSEMENT 

AGREEMENT?

Bank of America was permitted to rely on the Borrowers’ certifications 

unless it had actual knowledge that the conditions precedent were not satisfied. 

During the relevant period, the Borrowers certified that the conditions precedent 

were met. Therefore, Bank of America could have only been in breach by 

disbursing funds to the Borrowers if it had actual knowledge that the conditions 

precedent were not satisfied. 

In granting summary judgment to Bank of America, the District Court 

determined that “with all inferences in favor of the Term Lenders, the Term 

Lenders . . . failed to present a genuine issue of material fact as to whether Bank of 

America, as Disbursement Agent or Bank Agent, had actual knowledge of the 

failure of any conditions precedent to disbursement.” In re Fontainebleau, 2012 

WL 930290, at *48. For the reasons we will outline here, we have come to a 

different conclusion. 

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As detailed in the District Court’s thorough opinion, the Term Lenders 

contend that Bank of America should have stopped disbursing funds to the 

Borrowers because, at some point between September 2008 and March 2009, Bank 

of America became aware of certain events, discussed below, that it knew caused 

the failure of seven separate conditions precedent listed in § 3.3 of the 

Disbursement Agreement. Id. at *8–9, 15–24. Under the terms of that agreement, 

once the Bank of America knew that conditions precedent were not satisfied, it was 

required to issue a Stop Funding Notice to temporarily halt disbursal of the funds. 

1. Lehman Brothers’ Bankruptcy and Failure to Fund

Lehman Brothers Holdings, Inc. (Lehman) was the largest lender under the 

Retail Facility and the Administrative Agent of the Retail Facility. No one 

disputes that Lehman filed for bankruptcy on September 15, 2008. Neither is it 

disputed that Fontainebleau funded Lehman’s approximately $2.5 million share of 

the September 2008 Retail Advance and essentially funded Lehman’s portion of 

the Retail Advances from December 2008 through March 2009 by reimbursing 

ULLICO, a Co-Lender under the Retail Facility, for funding those amounts.

The failure of Lehman may have caused the failure of several conditions 

precedent in and of itself. For example, Fontainebleau’s funding of Lehman’s 

share of the September Retail Advance was a failure of the condition in § 3.3.23, 

requiring that the Retail Lenders make all advances required of them. Also, if 

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Lehman’s bankruptcy was a “change in the economics” of the Project “which 

could reasonably be expected to have a Material Adverse Effect,” there would have 

been a failure of the condition in § 3.3.11, requiring that no such change shall have 

occurred. 5 

What the parties do dispute is whether Bank of America had actual 

knowledge of these events and whether the impact of these events on the 

conditions precedent was such that the disbursing of funds constituted a breach of 

contract. The Term Lenders argue that Bank of America had actual knowledge 

that Lehman did not fund its share of the September Retail Advance and that 

Fontainebleau paid the money for Lehman. In support of this view of the facts, the 

Term Lenders point to a number of things: 1) a series of letters from Highland 

Capital Management, one of the original term lenders, alerting Bank of America to 

the serious impact Lehman’s bankruptcy could have on the Project and suggesting 

that Fontainebleau funded Lehman’s share of the September Retail Advance; 2) 

testimony by McLendon Rafeedie, the primary contact at TriMont Real Estate 

 5 The Term Lenders also argue that Lehman’s bankruptcy and its failure to fund could have led 

to the failure of several other conditions precedent in the Disbursement Agreement: § 3.3.21, 

requiring that the Bank Agent shall not have become aware of information that is materially 

inconsistent with the information disclosed to them; § 3.3.3, requiring that no “Default or Event 

of Default” has occurred and is continuing ; and § 3.3.2, requiring that the Borrowers’ 

representation that there was no “Event of Default” was true in all material respects. Our 

analysis of Bank of America’s actual knowledge applies equally to these conditions precedent 

even though we do not specifically discuss them. The Term Lenders made other arguments on 

appeal about why genuine issues of material fact remain with respect to Bank of America’s 

knowledge of the failure of these conditions. However, our analysis in this section makes it 

unnecessary for us to address them. 

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Advisors, Inc. about TriMont’s role as servicer of the Retail Facility, explaining 

that he knew Fontainebleau funded for Lehman and suggesting that it was possible 

that he informed Bank of America about this; 3) an October 2008 meeting among 

executives of Fontainebleau, Bank of America, and certain Retail Co-Lenders 

where the implications of Lehman’s bankruptcy were discussed; and 4) 

Fontainebleau’s suspicious evasiveness on the topic of Lehman’s bankruptcy and 

its nonresponsive answers to Bank of America’s questions about who funded 

Lehman’s share of the September Advance.

As the District Court’s opinion details, there are ways to discount each of 

these categories of evidence as showing, at most, a reason that Bank of America 

should have been suspicious that Fontainebleau funded Lehman’s share of the 

September Retail Advance. See In re Fontainebleau, 2012 WL 930290, at *37–40. 

However, taken together and viewed in the light most favorable to the Term 

Lenders, we conclude that this circumstantial evidence creates a genuine issue of 

material fact with respect to whether Bank of America had actual knowledge that 

Fontainebleau paid Lehman’s share of the September Retail Advance. Cf. United 

States v. Santos, 553 U.S. 507, 521, 128 S. Ct. 2020, 2029 (2008) (explaining that 

the “knowledge element” of the offense “will be provable (as knowledge must 

almost always be proved) by circumstantial evidence”).

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Forwarding a similar argument, the Term Lenders also say that Bank of 

America had actual knowledge that Lehman’s bankruptcy was a “change in the 

economics . . . which could reasonably be expected to have a Material Adverse 

Effect.” To support this proposition, the Term Lenders highlight: 1) the large share

of the Retail Facility that Lehman was responsible for funding; 2) 

contemporaneous statements made by Bank of America employees about the 

potential impact Lehman’s bankruptcy would have on the Project together with 

their later explanations of those statements; 3) the letters from Highland Capital 

Management mentioned above; and 4) discussions at the October 2009 meeting

(also mentioned above) about the impact of Lehman’s bankruptcy on the Project 

and the Retail Co-Lenders’ unwillingness to pay Lehman’s portion if Lehman was 

unable to pay.

The District Court’s opinion accurately details how, despite Lehman’s 

bankruptcy, “there was no indication that there would be a shortfall in Retail Funds 

or that the Retail Lenders would fail to honor their obligations under the Retail 

Facility.” In re Fontainebleau, 2012 WL 930290, at * 17. However, when taken 

together and viewed in the light most favorable to the Term Lenders, we conclude 

that the Term Lenders’ evidence raises a genuine question of material fact about 

whether Bank of America had actual knowledge that Lehman’s bankruptcy was a 

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change in the economics of the Project “which could reasonably be expected to 

have a Material Adverse Effect.” (emphasis added). 

2. First National Bank of Nevada’s Repudiation, Cost Overruns, and the 

Default of Several Delay Draw Term Lenders 

That several other events of consequence happened during the period of

September 2008 through 2009 is also undisputed. First, in late December 2008, 

the Federal Deposit Insurance Corporation, which had been appointed as receiver 

of First National Bank of Nevada (a Delay Draw Term Loan and Revolving Loan 

Lender), formally repudiated First National Bank of Nevada’s unfunded Senior 

Credit Facility commitments. These commitments amounted to $1,666,666 under 

the Delay Draw Term Loan and $10,000,000 under the Revolver Loan. 

Second, in January and March 2009, the Construction Consultant issued 

Project Status Reports expressing concerns that the Borrowers’ Anticipated Cost 

Report did not accurately reflect increases in the Project budget. In March, the 

Consultant issued a Construction Consultant Advance Certificate declaring that 

there were material errors in the Advance Request and that the budget did not 

accurately reflect costs. By the end of March, the Borrowers increased the Project 

budget by more than $114,000,000.6

 6 The Borrowers first increased construction costs by $64,854,000. Based on the Construction 

Consultant’s Advance Certificate, the Borrowers increased the budget by another $50,000,000. 

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Third, in March 2009, the Borrowers submitted a Notice of Borrowing 

requesting a Delay Draw Term Loan for the entire $350 million facility. 

Guggenheim (which controlled five Delay Draw Term Loan investment funds) and 

Z Capital Finance, LLC (a Delay Draw Term Lender) failed to give Bank of 

America funds as they were obligated to under the Credit Agreement. 

Guggenheim’s portion of the Delay Draw Term Loan was $10,000,000 and Z 

Capital was responsible for $11,666,666. Despite their failure to fund, Bank of 

America included these commitments as “Available Funds” to calculate whether 

the Project was “In Balance.” 

No one disputes that these events may be relevant to several conditions 

precedent. For example, if either First National Bank of Nevada’s repudiation or 

Guggenheim’s and Z Capital’s failures to fund “could reasonably be expected to 

result in a Material Adverse Effect,” this would have been an Event of Default 

under the Credit Agreement. Based on this, the condition in § 3.3.3 of the 

Disbursement Agreement would not have been satisfied.

7

 Also, if these events, 

 7 This condition required that “No Default or Event of Default shall have occurred and be 

continuing.” “Event of Default” was defined as being an “Event of Default under any of the 

Facility Agreements.” One “Event of Default” under the Credit Agreement was any breach or 

default by any party to the agreements of any term of the agreements provided that it “could 

reasonably be expected to result in a Material Adverse Effect.” 

If Bank of America had actual knowledge that the condition in § 3.3.3 was not satisfied 

because there was an “Event of Default,” the condition in § 3.3.2 would also be implicated 

because Bank of America would have had actual knowledge that Fontainebleau’s representation 

that there was no “Event of Default” was not “true and correct.” 

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considered together with Lehman’s bankruptcy, amounted to a “change in the 

economics” of the Project “which could reasonably be expected to have a Material 

Adverse Effect,” then the condition in § 3.3.23 would not have been satisfied. 

However, the parties do dispute whether these events did, in fact, cause 

failures of the conditions precedent and whether Bank of America had actual 

knowledge of the failures. The primary basis for the District Court’s determination 

that these events did not constitute failures of conditions precedent, which Bank of 

America urges us to adopt, was its determination that each of these events was not 

material, as a matter of law. See In re Fontainebleau, 2012 WL 930290, at *43–44. 

In arguing to defeat this materiality determination by the District Court, and to 

support their own view that these events “could reasonably be expected to have a 

Material Adverse Effect,” the Term Lenders: 1) take issue with the District Court’s

finding that the loan amounts of the Senior Credit Facility that were not available 

due to First National Bank of Nevada’s repudiation and Guggenheim’s and Z 

Capital’s failures to fund were immaterial as a matter of law; 2) point out that, as 

the District Court acknowledged, Guggenheim’s and Z Capital’s failures to fund 

caused the Project’s budget to be out of balance; 3) highlight Bank of America’s 

recognition of how difficult it would be to secure alternative lenders; and 4) argue 

that “[t]he intricate, interlocking agreements reflected the reality that no reasonable 

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lender would fund without assurances that other lenders would also fund to 

completion.” 

Considering all of this together, the Term Lenders have raised genuine 

issues of material fact about whether there were “Events of Default” to the extent 

that these events “could reasonably be expected to have a Material Adverse Effect” 

and whether Bank of America had actual knowledge of this fact. Cf. e.g., Lucas v. 

Fla. Power & Light Co., 765 F.2d 1039, 1040–41 (11th Cir. 1985) (explaining that 

“questions of materiality” are “[m]ixed questions of law and fact” that “involve 

assessments peculiarly within the province of the trier of fact”); Willjeff, LLC v. 

United Realty Mgmt. Corp., 920 N.Y.S.2d 495, 497 (N.Y. App. Div. 2011) 

(explaining that materiality is generally a question for the finder of fact unless “the 

evidence concerning the materiality is clear and substantially uncontradicted”). 

Even if First National Bank of Nevada’s repudiation, and Guggenheim’s and Z 

Capital’s failures to fund could not have been expected to result in a Material 

Adverse Effect when considered one by one, taken together and in conjunction 

with the large increase in the Project budget and Lehman’s bankruptcy, we have no

problem concluding there is a genuine issue of material fact regarding whether 

Bank of America knew that there was a “change in the economics” of the Project 

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“which could reasonably be expected to have a Material Adverse Effect,” thereby

implicating the condition in § 3.3.11. 8

C. WAS BANK OF AMERICA GROSSLY NEGLIGENT?

Under § 9.10 of the Disbursement Agreement, Bank of America, as 

Disbursement Agent, had no responsibility “except for any bad faith, fraud, gross 

negligence or willful misconduct” and could not be held liable for any loss “except 

as a result of [its] bad faith, fraud, gross negligence or willful misconduct.” Under 

New York law, these are high standards. For example, New York law defines 

gross negligence as “conduct that evinces a reckless disregard for the rights of 

others or smacks of intentional wrongdoing,” Colnaghi, U.S.A., Ltd. v. Jewelers 

Protection Servs., Ltd., 81 N.Y.2d 821, 823–24 (N.Y. 1993) (quotation marks 

omitted), or “the failure to exercise even slight care,” Food Pageant, Inc. v. 

Consolidated Edison Co., Inc., 54 N.Y.2d 167, 172 (N.Y. 1981). 

However, “[g]enerally, the particular standard of care which a defendant is 

judged against in a given case is a factual matter for the jury.” Food Pageant, Inc., 

54 N.Y.2d at 172. Thus, “[w]here the inquiry is to the existence or nonexistence of

gross negligence . . . the question . . . [is] a matter for jury determination.” Id. at 

 8 The Term Lenders argue that Bank of America was in breach of the Disbursement Agreement 

because it disbursed funds even though it had actual knowledge that seven conditions precedent 

had failed. Because we have concluded that there were genuine issues of material fact as to five 

of these conditions, we decline to address the remaining two conditions precedent. Neither will 

we address Term Lenders’ arguments about several other purported failures of the conditions 

precedent we have discussed. We leave it to the District Court to reevaluate these issues, as 

necessary, in light of this opinion and further proceedings before that court. 

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173. “While gross negligence may be found as a matter of law in some limited 

instances,” Trump Int’l Hotel & Tower v. Carrier Corp., 524 F. Supp. 2d 302, 315 

(S.D.N.Y. 2007), it cannot be resolved as a matter of law in this case. 

Here, there is an issue of fact about whether Bank of America was grossly 

negligent. For example, under our interpretation of the Disbursement Agreement, 

Bank of America would have been in breach of the Agreement if it disbursed the 

Term Lenders’ funds to the Borrowers even though it had actual knowledge that 

any one of the conditions precedent had failed. We have discussed why we believe

there are genuine issues of material fact about whether Bank of America had actual 

knowledge that a number of conditions precedent had failed. In addition to those 

things we discussed, the Term Lenders have also established a dispute of material 

fact on the subject of whether Bank of America had actual knowledge that some of 

these conditions precedent had failed months before it disbursed funds to the 

Borrowers or that Bank of America had actual knowledge that some of these 

conditions precedent had failed for several different reasons. A jury could find that 

the cumulative effect of Bank of America’s disbursing funds despite having actual 

knowledge about the failure of many different conditions precedent amounted to 

gross negligence. A jury could also find that certain conditions precedent were so 

material to the Agreement that Bank of America’s conduct, including disbursing

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funds to the Borrowers, showed a reckless disregard for the Term Lenders’ rights

to the extent it knew that those conditions were not satisfied. 

V. SEALED DOCUMENTS

Many of the documents filed in this case, including the parties’ motions for 

summary judgment and appeal briefs, were filed under seal. An example of the 

documents filed under seal is the Disbursement Agreement, which is central to this 

case. This same document was publicly filed in other proceedings, including a 

case we heard at oral argument on the same day as this one. 

At the request of the court, the parties have filed a joint letter agreeing that 

the underlying Agreements and many of the other documents in the record should 

be unsealed. The parties also listed certain documents they wish to continue to 

keep under seal. Upon remand of this case to the District Court, the Clerk is 

directed to unseal all of the documents in the record, except those delineated in the 

parties’ request to retain them as sealed.

VI. CONCLUSION

Having concluded that under the Disbursement Agreement Bank of America 

was permitted to rely on the Borrowers’ certifications that the conditions precedent 

were satisfied unless it had actual knowledge to the contrary, and finding that there 

remain genuine issues of material fact about whether Bank of America had such 

knowledge and whether its actions amounted to gross negligence, we affirm in part 

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and reverse in part the District Court’s order. Specifically, we affirm the District 

Court’s denial of the Term Lenders’ Motion for Partial Summary Judgment and the 

District Court’s interpretation of Bank of America’s obligations under the 

Disbursement Agreement. We reverse the District Court’s grant of summary 

judgment in favor of Bank of America. We also remand the case to the District 

Court for further proceedings consistent with this opinion. 

AFFIRMED IN PART, REVERSED IN PART, and REMANDED

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