16-432(L) Sparta v. DZ Bank

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT



### SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A 1 SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007 IS PERMITTED AND IS GOVERNED BY 2 FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. 3 WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY 4 MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE 5 NOTATION “SUMMARY ORDER”). A PARTY CI TING TO A SUMMARY ORDER MUST SERVE A 6 COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL. 7

At a stated term of the United States Court of Appeals for the Seco nd Circuit, held at 8 the Thurgood Marshall United States Courthou se, 40 Foley Square, in the City of New York, 9 on the 22 nd day of February , two thousand seventeen. 10 11 PRESENT: 12 P IERRE N. L EVAL , 13 G UIDO C ALABRESI , 14 S USAN L. C ARNEY , 15 Circuit Judges
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_____________ _______________ _____________ 17 18 S PARTA C OMMERCIAL S ERVICES , I NC ., 19 20 Plaintiff-Appellant-Cross-Appellee
, 21 22 v. Nos. 16-432 (L) , 16-494 (XAP) 23 24 DZ B ANK , AG D EUTSCHE Z ENTRAL

25 G ENOSSENSCHAFTS B ANK , F RANKFURT AM M AIN , 26 N EW Y ORK B RANCH , 27 28 Defendant-Appellee-Cross-Appellant

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_____________ _______________ _____________ 30 31 FOR APPELLANT: D AN B RECHER , Scarinci & Hollenbeck 32 LLC, New York, NY. 33 34 FOR APPELLEE: J OHN M. C ONLON (Andrew Calica, on the 35 brief ), Mayer Brown LLP, New York, NY. 36 372 Appeal from a judgment of the United States District Court for th e Southern District 1 of New York (Stanton, J. ). 2
UPON DUE CONSIDERATION WHEREOF, IT IS HEREBY ORDERED, 3 ADJUDGED, AND DECREED that the judgment entered by the District Court on 4 January 20, 2016, is AFFIRMED

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Sparta Commercial Services, Inc. (“Spart a”) appeals the dismissal of its claims, 6 following a bench trial, for breach of the implie d contract of good faith and fair dealing and 7 negligent misrepresentation. Sparta also ap peals the District Court’s preclusion of its 8 proffered expert, Gregory Gac, from testifying. DZ Bank, AG Deutsche Zentral9 GenossenschaftsBank (“DZ Bank”) cross-appeals from the District Court’s grant of 10 summary judgment in favor of Sparta on DZ Bank’s indemnification claims. We assume the 11 parties’ familiarity with the underlying facts an d the procedural history of the case, to which 12 we refer only as necessary to ex plain our decision to affirm. 13

I. Sparta’s Claims 14
Sparta first contends that, at the completion of trial, the District Court should have 15 allowed it leave to amend its complaint to re assert a claim for negligent misrepresentation 16 that had previously been dismissed. The District Court implicitly denied this request when it 17 rejected Sparta’s claims in its Find ings of Fact and Conclusions of Law. 18

Federal Rule of Civil Pro cedure 15 provides that “[a] party may move—at any time, 19 even after judgment—to amend the pleadings to conform them to the evidence [presented 20 at trial] and to raise an unpleaded issue.” Fed. R. Civ. P. 15(b)(2). A motion to amend 21 pursuant to Rule 15(b)(2) may properly be denied, however, when amendment would be 22
futile. See, e.g.
, MacDraw, Inc. v. CIT Grp. Equip. Fin., Inc. , 157 F.3d 956, 962-6 3 (2d Cir. 1998) 23 (per curiam). We review the denial of a Rule 15(b)(2) motion for abuse of discretion. Id. at 24
962. 25
The District Court had previously dismi ssed Sparta’s negligent misrepresentation 26 claim in part because Sparta did not make any plausible allegations of DZ Bank’s negligence. 27
See Sparta Commercial Servs., Inc. v. DZ Bank AG Deutsche Zentral-Genossenschaftsbank , No. 12- 283 CV-9220 (LLS), 2013 WL 4106344, at *2 (S.D.N.Y. Aug. 12, 2013). Sparta contends that the 1 District Court wrongfully refused to allow it to amend its comp laint to allege that DZ Bank 2 committed negligent misrepresentation by fail ing to disclose that DZ Bank’s ASG group 3 prevailed on the bank’s KRY group to grant Sp arta a stop-gap thirty-day extension. Even 4 assuming that DZ Bank would have suffered no prejudice from a belated amendment, and 5 assuming further that Sparta did not waive its renewed claim by moving to amend long after 6 receiving the evidence that it says supports its claim, the amendment would have been futile. 7 The evidence presented at trial consistently s howed that DZ Bank’s ASG group tried to help 8 Sparta (as that was its assigned duty at the bank) by arguing to the KRY group in support of 9 granting a thirty-day extension of the parties’ revolving credit agreement (“RCA”), to afford 10
more time for consideration of whether to grant Sparta a one-year extension. Sparta 11
introduced no evidence at trial that the th irty-day extension request worked to its 12 disadvantage or was motivated by anythi ng but support from DZ Bank. Nor was any 13 evidence introduced suggesting that DZ Bank had acted negligently. An amendment to 14 replead the negligent misrepresentation claim th us would have been futile, and the District 15
Court acted well within its discretion in denying the motion to amend. 16
Sparta next argues that the District Co urt abused its discreti on when it precluded 17 Sparta’s proffered banking practices expert, Gr egory Gac, from testifying. We review for 18
abuse of discretion a district court’s exclusion of an expert’s testimony under Federal Rule of 19
Evidence 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc. , 509 U.S. 579 (1993). We will 20 reverse only if we find the court’s decision was “manifestly erroneous.” Amorgianos v. Nat’l 21 R.R. Passenger Corp. , 303 F.3d 256, 264-65 (2d Cir. 2002). “An expert ’s opinions that are 22 without factual basis and are based on speculati on or conjecture” should be excluded from 23 consideration at summary judgment or trial. Major League Baseball Props., Inc. v. Salvino, Inc.
, 24 542 F.3d 290, 311 (2d Cir. 2008). A district court properly rejects an expe rt’s testimony when 25 the testimony involves qualitative opinions ab out an area outside the expert’s field of 26 expertise, or when the expert opines on witnesse s’ credibility or inappropriately draws legal 27
conclusions. See Morse/Diesel, Inc. v. Trinity Indus., Inc. , 67 F.3d 435, 444 (2d Cir. 2005); DiBella 28 v. Hopkins , 403 F.3d 102, 121 (2d Cir. 2005). 294 Sparta sought to introduce Gac as an expert to testify about banking industry 1 standards and practices with respect to communications regarding the RCA and the 2 extension request. Gac’s report makes clear that the District Court acted within its discretion 3 in excluding him as an expert witness. His prof fered report is replete with legal conclusions, 4 inappropriate opinions on credibil ity, and assertions appropriate to the testimony of fact 5 witnesses that did not depend on expert knowledge. The District Court apparently 6 concluded that no part of the report represen ted appropriate expert testimony, and Sparta 7 has not identified to us any portions for which their exclusion would have been an abuse of 8
the District Court’s discretion. We therefore a ffirm the District Court’s exclusion of Gac’s 9 testimony. 10
Finally, Sparta challenges the District Cour t’s ruling on its good faith and fair dealing 11 claim by arguing that the court (1) did not disc uss the thirty-day extension request that DZ 12 Bank made internally without c onsulting Sparta; and (2) incorr ectly found that Sparta would 13 have been unable to meet its financing ob ligations—a precondition to the RCA—through 14 financing from Glenn Little, Sparta’s main inve stor. Following a bench trial, we review the 15 district court’s findings of fact for clear error and its conclusions of law de novo

. Mobil Shipping 16 & Transp. Co. v. Wonsild Liquid Carriers Ltd. , 190 F.3d 64, 67 (2d Cir. 1999). To prevail on its 17 good faith and fair dealing claim, Sparta had to show that DZ Bank did something that had 18 “the effect of destroying or injuring the right of [Sparta] to receive the fruits of the [parties’] 19
contract.” Tractebel Energy Mktg., Inc. v. AEP Power Mktg., Inc. , 487 F.3d 89, 98 (2d Cir. 2007) 20 (citation omitted). 21
Contrary to Sparta’s contention, the Di strict Court did address the thirty-day 22 extension request in its Findings of Fact and Conclusions of Law. The court credited the 23 testimony of DZ Bank’s witnesses over that of Sparta’s, and reasonably accepted DZ Bank’s 24 characterization of the request as a way for the ASG group to assist Sparta’s efforts to obtain 25 a one-year extension Sparta desired. The thirty-d ay request was therefor e designed to enable 26 Sparta to take advantage of the RCA. Accordin gly, in seeking it, DZ Bank did not breach the 27 covenant of good faith and fair dealing. The District Court did not clearly err in reaching this 28 conclusion, nor did it err in its finding that, overall, DZ Bank never misled Sparta about its 295 prospects for obtaining an extension of the RC A, or on the progress of Sparta’s requests for 1 an extension. With respect to Little’s invest ment, the evidence showed that regardless of 2 whether any investment from him might have b een forthcoming, Sparta never satisfied the 3 RCA’s preconditions to use before the time to do so expired. Moreover, absent 4 documentation of any promise by Little to supp ort Sparta and in the face of testimony from 5 Sparta’s CEO that it expected to qualify with out Little’s involvement, the court was entitled 6 to be skeptical of Sparta’s prospects for satis fying the preconditions. We thus find no clear 7
error in the District Court’s rejection of Sparta’s claim. 8

II. DZ Bank’s Claim 9
DZ Bank cross-appeals from the District Court’s grant of summary judgment against 10 it on its claim seeking indemnification from Sp arta for the attorneys’ fees and costs DZ Bank 11 accrued in defending against Sparta’s suit. Un der New York law, indemnification clauses 12 “must be strictly construed” and a promise to indemnify “should not be found unless it can 13 be clearly implied from the language and purpose of the entire agreement and the 14 surrounding facts and circumstances.” Hooper Assocs., Ltd. v. AGS Computers, Inc. , 74 N.Y.2d 15 487, 491-92 (1989); see Mid-Hudson Catskill Rura l Migrant Ministry, Inc. v. Fine Host Corp. , 418 16 F.3d 168, 177-178 (2d Cir. 2005). 17
Section 11.1 of the RCA provides that Sparta will indemnify DZ Bank for amounts 18 arising out of or as a result of the RCA that re late to, for example, “[a]ny representation or 19 warranty made or deemed made by [Sparta]” or “[ t]he failure by [Sparta] to comply with any 20 term, provision or covenant c ontained in this Agreement.” 1 Section 11.2 states that Sparta 21 will indemnify DZ Bank for any amounts aw arded against or incurred by DZ Bank “by 22 reason of any acts or omissions” of Sparta, “including, but not limited to . . . (i) any 23 representation or warranty made or deemed made by [Sparta] . . . (iii) the failure of [Sparta] 24 to comply with its covenants under this Agr eement . . . (iv) any litigation, proceedings or 25 investigation against [Sparta].” 26

1 Section 11.1 in fact refers to a different Spar ta entity than the Appellant here, though DZ Bank argues that Sparta should be estopped from trying to draw a material distinction between the two. We need not resolve the issue because we do not read the indemnification clauses to cover DZ Bank’s claims.6 DZ Bank argues that the broad language of these provisions—in particular, the 1 phrase “any acts or omissions” in section 11.2—covers Sparta’s act in bringing litigation 2 against DZ Bank. We agree with the District Court that, under New York law, the 3 indemnification clauses do not clearly enough ev ince the necessary intent to require Sparta to 4 indemnify DZ Bank for the costs of any and all litigation. The District Court reached this 5 result by concluding that DZ Bank’s broad reading would render portions of the clauses 6 superfluous. For example, subclauses 11.2(a)(i ) and 11.2(a)(iii) would be unnecessary if the 7 “any acts or omissions” language in fact covered any acts or omissions. Although the 8 subclauses in section 11.2 seem designed to provide a non-exhaustive list, the examples 9 provided in the subclauses suggest that the clauses do not cover literally any act or omission, 10
but acts or omissions that are of a kind simi lar to the examples provided. Those examples 11 (and the examples in section 11.1) pe rtain to indemnification for Sparta’s own failures to 12 comply with the covenants embodied in th e RCA. The examples do not reflect an 13 unmistakably clear intent to have Sparta inde mnify DZ Bank for litigation that is brought by 14 Sparta itself to prosecute DZ Bank’s own per ceived breaches of the RCA. Indeed, it would 15 be perverse for a contract to include an in demnification provision th at would so strongly 16 disincentivize a potentially wr onged party from bringing suit; as Sparta points out, a broad 17 reading of the clauses would mean that Sparta would have to indemnify DZ Bank even if 18 Sparta’s claims of breach here had been foun d to be meritorious. Because the intention to 19 cover the mere act of litigation is not “unm istakably clear from the language of the 20 contract,” we will not interpret the clauses to sweep the litigation costs of this suit within 21
their ambit. Mid-Hudson , 418 F.3d at 177 (internal quotati on marks and citation omitted). 22

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We have considered the parties’ remainin g arguments on appeal and find them to be 24 without merit. The judgment of the District Court is AFFIRMED

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FOR THE COURT: 26 Catherine O’Hagan Wolfe, Clerk of Court 27