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17-2783-cv 

Negrete v. Citibank 

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 

3rd day of January, two thousand nineteen. 

 

PRESENT: PETER W. HALL, 

GERARD E. LYNCH, 

Circuit Judges, 

 PAUL G. GARDEPHE,

 District Judge. *

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EDUARDO NEGRETE, GERVASIO NEGRETE, 

Plaintiffs-Appellants,

v. No. 17-2783-cv 

CITIBANK, N.A., 

Defendant-Appellee. 

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FOR APPELLANTS: BLAINE H. BORTNICK, James W. Halter (on the brief), 

Rasco Klock Perez & Nieto, LLC, New York, New 

York. 

FOR APPELLEE: MARSHALL FISHMAN, Samuel Joseph Rubin (on the 

brief), Goodwin Proctor, LLP, New York, New York. 

 * Judge Paul G. Gardephe of the United States District Court for the Southern District of New 

York, sitting by designation. 
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Appeal from a judgment of the United States District Court for the Southern District of 

New York (Sweet, J.). 

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, 

AND DECREED that the judgment of the district court is AFFIRMED. 

We assume the parties’ familiarity with the facts, record of prior proceedings, and 

arguments on appeal, which we reference only as necessary to explain our decision to affirm. 

Background. 

Plaintiffs-Appellants Eduardo and Gervasio Negrete (collectively, “the Negretes”), are 

brothers and Mexican citizens who maintain several bank accounts with Defendant-Appellee 

Citibank, N.A. and signed “International Swaps and Derivatives Association Master 

Agreements with Citibank to enable [them] to execute FX transactions through Citibank, 

among other transactions.” First Amended Complaint (“FAC”) FAC ¶ 6. Under these 

ISDA Agreements the Negretes executed thousands of transactions through Citibank, 

including pairing U.S. Dollars, Euros, Yen, Australian Dollars, Canadian Dollars, Great British 

Pounds, Mexican Pesos, and other currencies, amounting to roughly $15 billion traded per 

annum. As contemplated by the ISDA Agreements, the Negretes gave instructions for these 

transactions via telephone to the Latin American desk in Citibank’s New York office. The 

2010 ISDA Agreement, which was signed only be Gervasio Negrete, limited liability 

thereunder by stating that “[n]o party shall be required to pay or be liable to the other party 

for any consequential, indirect, or punitive damages, opportunity costs or lost profits” (the 

“limitation of liability provision”). J. App’x at 148 (2010 ISDA Agreement provision 5(g)). 

 
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The Negretes’ trading mostly consisted of placing “limit” and “market” orders. “[W]ith 

respect to both types of trades, Citibank added an undisclosed markup to [the Negretes’] 

instructions without informing them and, in fact, at times, affirmatively lying to [the Negretes] 

that Citibank was adding such a markup.” FAC ¶ 19. 

On May 20, 2015, Citicorp, parent of Citibank, pled guilty to conspiring to rig bids in the 

FX spot market between December 2007 and January 2013, in violation of the Sherman 

Antitrust Act, 15 U.S.C. § 1. In the relevant plea agreement Citicorp admitted that: 

[T]hrough its currency traders and sales staff, [Citicorp] engaged in . . . currency 

trading and sales practices in conducting FX Spot Market transactions with 

customers via telephone, email, and/or electronic chat, to wit: (i) intentionally 

working customers’ limit orders one or more levels, or “pips,” away from the 

price confirmed with the customer; (ii) including sales markup, through the use 

of live hand signals or undisclosed prior internal arrangements or 

communications, to prices given to customers that communicated with sales 

staff on open phone lines; (iii) accepting limit orders from customers and then 

informing those customers that their orders could not be filled, in whole or in 

part, when in fact the defendant was able to fill the order but decided not to do 

so because the defendant expected it would be more profitable not to do so . . . 

FAC ¶ 21.1 Under the terms of the plea agreement, Citibank made a disclosure to its FX 

customers, including the Negretes. This was the first time the Negretes were aware that 

Citibank was adding an undisclosed markup to their transactions. The brothers shortly 

thereafter met with their banker at Citibank who “stated, in sum and substance, ‘I feel very 

bad about lying to you two. I was ordered by my superiors at Citibank to add a markup to 

all of your orders. I was also instructed that I could not let you know about the markups. 

That is why, when you complained about orders not being filled, I had to come up with some 

 

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 “[A] ‘pip’ is the smallest price move of a given exchange rate. As most currency pairs are 

priced to four decimal places, a pip is often approximately equal to one basis point.” FAC ¶ 31. 
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excuses, without revealing the real reason your orders were not filled as instructed.’” FAC ¶ 

28. 

Citibank would also decline to execute FX trades on behalf of the Negretes where the 

market reached the threshold for a limit order they had placed. When the Negretes noticed 

such an occurrence, they would call Citibank to inquire, and this happened roughly 150 times. 

The individuals on the Latin American trading desk (named in the First Amended Complaint) 

specifically “assured [the Negretes], on each occasion, that Citibank was not adding markups 

to [their] trade instructions.” FAC ¶ 60. In other instances, Citibank would partially fulfill 

an order to retain inventory at a more advantageous price to Citibank.2 

“Citibank made substantial profit off of [the Negretes] separate and apart from the 

individual FX trades by extending margin loans to Plaintiffs to enable them to trade FX. The 

interest payments on these loans made by Citibank to [the Negretes] totaled hundreds of 

thousands of dollars.” FAC ¶ 99. 

The Negretes filed their original Complaint on September 16, 2015, alleging fraud, breach 

of the ISDA Agreements, and negligence, based on Citibank’s undisclosed markups and 

allegedly erroneous margin calls. Citibank moved to dismiss the original Complaint, and the 

Negretes filed a cross-motion for partial summary judgment with respect to the breach of 

contract claim. On May 19, 2016, the district court dismissed the original Complaint in its 

 

2

 There are allegations of a total of 35 specific instances of wrongdoing in the First Amended 

Complaint. These examples were included after the district court dismissed the original complaint 

for lack of specificity. 
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entirety with leave to amend, and denied the Negretes’ cross-motion for partial summary 

judgment, finding that the Negretes had failed to plead fraud with sufficient particularity. 

On June 20, 2016, the Negretes filed the FAC, which asserts six claims for relief: (1) fraud 

by omission for the undisclosed markups; (2) fraudulent misrepresentation regarding the 

undisclosed markups; (3) breach of the ISDA Agreements regarding the undisclosed markups; 

(4) breach of the ISDA Agreements regarding the erroneous calculation of the Negretes’ 

collateral, and “making wrongful margin calls”; (6) breach of the covenant of good faith and 

fair dealing; and (5) fraud regarding the margin calls. FAC ¶¶ 149 – 82. 

Citibank moved to dismiss the First Amended Complaint and the Negretes moved for 

partial summary judgment. On February 27, 2017, the district court denied the Negretes’ 

motion and partially granted Citibank’s motion. The district court held that the Negretes’ 

claims for covering trades [at a later time] at a worse price than the contract price,” were 

adequately pled to survive the motion to dismiss because they pled actual damages. The 

court dismissed all other claims. Sp. App’x at 86. 

Citibank filed an answer to the remaining claim on March 13, 2017. The Negretes made 

a request for a final, appealable judgment under Federal Rule of Civil Procedure 54(b), that 

request was denied, and the Negretes voluntarily dismissed the remaining claim. This appeal 

followed. 

Discussion. 

We review de novo the district court’s decisions on both motions to dismiss and motions 

for summary judgment. Bernheim v. Litt, 79 F.3d 318, 321 (2d Cir. 1996); Mullins v. City of New 

York, 653 F.3d 104, 113 (2d Cir. 2011). In reviewing a district court’s grant of a motion to 
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dismiss, this court “accept[s] as true the factual allegations made in the complaint and draw[s] 

all inferences in favor of the plaintiffs.” BPP Illinois, LLC v. Royal Bank of Scotland Group PLC, 

859 F.3d 188, 191 (2d Cir. 2017) (internal quotation marks omitted). To survive a motion to 

dismiss, a complaint must contain “sufficient factual matter, accepted as true, to ‘state a claim 

for relief plausible on its face.’” Aschcroft v. Iqbal, 556 U.S. 662, 663 (2009) (quoting Bell Atl. 

Corp. v. Twombly, 550 U.S. 544, 555 (2007)). 

I. The district court properly dismissed the Negretes’ breach of contract claims. 

“Under New York law, a breach of contract claim requires proof of (1) an agreement, (2) 

adequate performance by the plaintiff, (3) breach by the defendant, and (4) damages.” Fischer 

& Mandell, LLP v. Citibank, N.A., 632 F.3d 793, 799 (2d Cir. 2011) (internal quotation marks 

omitted). 

a. The claims for undisclosed markups do not allege a breach by Citibank.

The Negretes’ claims for breach of contract for undisclosed markups fail for the simple 

reason that they do not allege breach of contract. Nothing in the ISDA Agreements, or 

alleged to have occurred in the telephone conversations in which the Transactions were 

ordered prohibit Citibank’s undisclosed markups. 

The Negretes contend that they have adequately pled that the 35 contracts set out in the 

FAC required Citibank to give them the “best price” available on the market for their limit 

orders, and that Citibank failed to do so. The Negretes do not, however, cite any specific 

instance where they or any agent of theirs agreed with Citibank, as part of a completed contract 

under the ISDA Agreements, that Citibank would provide them with the “best price” in the 

market. Instead, the Negretes merely rely on the fact that they allegedly understood the 
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concept of a “limit order” to include an automatic assumption that they would be given the 

best price. But that allegation is not sufficient to allege a meeting of the minds sufficient to 

add a “best price” term to the oral FX trading contracts. 

In the absence of any explicit agreement for Citibank to obtain the best price for the 

Negretes, the district court correctly ruled that the ISDA Agreements imposed no such 

obligation. The ISDA Agreements created an arms-length counterparty relationship 

between the Negretes and Citibank, with respect to which each party acted as a principal, 

rather than as a fiduciary of the other. Therefore, absent an explicit agreement to the 

contrary, Citibank had no fiduciary obligation to provide the Negretes with the best execution 

for their FX trades, because Citibank was not acting as the Negretes’ broker or agent. 

b. The Negretes have not sufficiently alleged breach of contract with respect to the alleged erroneous margin 

calls. 

The district court held that the Negretes’ “fail[ure] to use the required dispute resolution 

provision to contest margin calls under the [ISDA Agreements] . . . invalidates the claims of 

invalid margin calls,” noting that such dispute resolution provisions have been held 

enforceable by courts within the Second Circuit. Sp. App’x at 35 (citing VCG Special 

Opportunities Master Fund Ltd. v. Citibank, N.A., No. 08 Civ. 1563 (BSJ), 2009 WL 311362, at *2 

(S.D.N.Y. Jan. 29, 2009) (holding that a party’s failure to invoke a dispute resolution provision 

precludes the party from later challenging its counterparty’s “request for additional collateral 

without having first vetted [its] claim in the manner agreed upon in the . . . Contract.”)). We 

agree. Even if the Negretes “complained” about certain margin calls that Citibank made, as 

they argue on appeal, the FAC does not allege that the Negretes complied with the dispute 

resolution procedure set forth in the ISDA Agreements. The Negretes’ breach of contract 
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claims based on Citibank’s allegedly erroneous margin calls claims were therefore properly 

dismissed by the district court as waived. 

c. The breach of covenant of good faith and fair dealing claims are duplicative of the breach of contract 

claims. 

The First Amended Complaint alleges that Citibank breached the covenant of good faith 

and fair dealing by taking and failing to disclose markups, FAC ¶ 165 (under Claim III), and 

erroneously calculating their collateral and making associated wrongful margin calls, FAC ¶ 

174 (under Claim IV). The district court held that these claims were duplicative of the breach 

of contract claims and dismissed them. Sp. App’x at 91 (quoting Harris v. Provident Life & 

Accident Ins., 310 F.3d 73, 81 (2d Cir. 2002) (explaining that an implied covenant claim “will 

not stand if it is duplicative of a breach of contract claim.”)). These claims were properly 

dismissed for the reason stated by the district court. The Negretes argue on appeal that their 

breach of the covenant of good faith and fair dealing claims are for Citibank’s “lying,” but that 

assertion is not supported by the allegations in the First Amended Complaint. The claims 

for breach of the covenant are expressly based on the same facts underlying the breach of 

contract claims. 

II. The district court properly dismissed the Negretes’ fraud claims.

The elements of fraud under New York law are: “[1] a representation of material fact, [2] 

the falsity of that representation, [3] knowledge by the party who made the representation that 

it was false when made, [4] justifiable reliance by the plaintiff, and [5] resulting injury.” Centro 

Empresarial Cempresa S.A. v. Am. Movil, S.A.B. de C.V., 17 N.Y.3d 269, 276 (2011) (internal 

quotation marks omitted); accord Evans v. Ottimo, 469 F.3d 278, 283 (2d Cir. 2006). 
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Claims for fraud must be pled with “particularity.” Fed. R. Civ. P. 9(b). “That ordinarily 

requires a complaint alleging fraud to (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. But the adequacy of particularized 

allegations under Rule 9(b) is . . . case- and context-specific.” United States ex rel. Chorches for 

Bankr. Estate of Fabula v. Am. Med. Response, Inc., 865 F.3d 71, 81 (2d Cir. 2017) (ellipses in 

original, internal quotation marks omitted). 

a. The Negretes have not alleged fraud regarding the undisclosed markups. 

The First Amended Complaint alleges that Citibank committed fraud by failing to disclose 

hidden markups, and by making deliberate and affirmative misrepresentations regarding those 

hidden markups. Reasonable minds could differ as to whether the First Amended Complaint 

sufficiently alleges the first four elements of fraud regarding these claims or alleges those 

elements with the particularity required by Rule 9(b), but the fifth element, loss causation, or 

resulting injury, is clearly unsatisfied. 

The district court correctly held, however, that the Negretes’ claimed damages for fraud, 

based on Citibank’s alleged misrepresentations about not charging markups, are all barred 

from recovery by New York’s “out-of-pocket” rule, because “[t]he damages alleged here are 

precisely the profits [that the Negretes] would have made were it not for the allegedly 

fraudulent markup[s].” Sp. App’x at 77. And under New York’s “out-of-pocket” rule, 

“there can be no recovery of profits which would have been realized in the absence of fraud” 

because “[d]amages are to be calculated to compensate plaintiffs for what they lost because of 

the fraud, not to compensate them for what they might have gained.” Lama Hldg. Co. v. Smith 
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Barney Inc., 88 N.Y.2d 413, 421 (1996). “[T]he rationale for the out-of-pocket loss rule [is] 

that losses based on ‘a hypothetical lost bargain [are] too undeterminable and speculative to 

constitute a cognizable basis for damages.’ A misrepresentation is tortious, therefore, only if 

it causes out-of-pocket losses. To hold otherwise would lead courts to award damages based 

solely on a ‘speculative . . . allegation that [the plaintiff] was injured at all.’” AHW Inv. P’ship, 

MFS, Inc. v. Citigroup Inc., 661 F. App’x 2, 4 – 5 (2d Cir. 2016) (quoting Starr Found. v. AIG, Inc., 

76 A.D.3d 25, 28 (1st Dep’t 2010)). 

b. The district court properly dismissed the Negretes’ claim for fraud for erroneous margin calls as 

duplicative of the breach of contract claim for margin calls.

The district court dismissed the fraud claim for erroneous margin calls as duplicative of 

the breach of contract claims for margin calls. In so holding the district court relied on 

Bridgestone/Firestone, Inc. v. Recovery Credit Servs., Inc., 98 F.3d 13, 20 (2d Cir. 1996). In that case 

this court held that where a claim for fraud is based on facts underlying breach of contract, 

the “plaintiff must either: (i) demonstrate a legal duty separate from the duty to perform 

under the contract . . . ; or (ii) demonstrate a fraudulent misrepresentation collateral or 

extraneous to the contract . . .; or (iii) seek special damages that are caused by the 

misrepresentation and unrecoverable as contract damages.” Bridgestone/Firestone, Inc., 98 F.3d 

at 20. 

The First Amended Complaint alleges that “pursuant to the ISDA Agreements, Citibank was 

responsible for calculating Plaintiffs’ collateral for the purposes of determining when to make 

margin calls.” J. App’x at 578, FAC ¶ 177 (emphasis added). The Negretes set forth no 

reasoned argument as to how misstatements of these calculations, which they alleged Citibank 
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was required to make under the contract between the parties, were not in fact germane to the 

contract and therefore not collateral or extraneous to it. 

III. The motion for partial summary judgment was properly denied. 

The district court could not have granted partial summary judgment to the Negretes for 

liability on their breach of contract claims because the district court correctly found that the 

First Amended Complaint did not allege valid damages and the Negretes thus had failed to 

plead a breach of contract claim sufficient to survive the motion to dismiss. Bigio v. Coca-Cola 

Co., 675 F.3d 163, 178 (2d Cir. 2012). 

We have considered all the Negretes’ arguments and conclude that they are without merit. 

Accordingly, we AFFIRM the amended judgment of the district court. 

FOR THE COURT: 

Catherine O’Hagan Wolfe, Clerk of Court