2023 New York Laws › BNK - Banking › Article 13 - Merger; Voluntary Dissolution; Superintendent's Taking Possession; Reorganization; Liquidation › 618-A - Repudiation of Contracts.

§ 618-a. Repudiation of contracts.  1. Except as otherwise provided in
this  section,  when  the  superintendent  has  taken  possession of the
business and property in this state of a  banking  organization,  unless
the federal regulator or insurer is appointed as receiver or liquidator,
the  superintendent  may  assume or repudiate any contract, including an
unexpired lease, of the banking organization: (a) to which such  banking
organization   is   a   party,   (b)   the   performance  of  which  the
superintendent, in the superintendent's  discretion,  determines  to  be
burdensome,   and  (c)  the  repudiation  of  which  the  superintendent
determines, in the superintendent's discretion, will promote the orderly
administration  of  the  banking  organization's  affairs.   After   the
expiration  of  ninety  days from the date that the superintendent takes
possession of the banking organization, any party to a contract with the
banking organization being liquidated may demand  in  writing  that  the
superintendent  assume or repudiate such contract. If the superintendent
has not assumed or repudiated the contract within fifteen calendar  days
from  the  date  of  receipt  of  the  demand by the superintendent, the
affected party may bring an action in the supreme court in the  judicial
district  in  which  the principal office of the banking organization is
located to obtain  an  order  requiring  the  superintendent  to  decide
whether to assume or repudiate that contract.  If the superintendent has
not  assumed  or repudiated a contract by one month before the last date
for filing claims against  the  banking  organization  being  liquidated
pursuant  to  section  six hundred twenty of this article, such contract
shall be deemed repudiated. Notwithstanding the foregoing, with  respect
to an unexpired lease of the banking organization for the rental of real
property  under  which  the  banking  organization  was a lessee, if the
superintendent   remains   in   possession   of   the   leasehold,   the
superintendent  shall  not be required to assume or repudiate such lease
and may continue in possession of such leasehold for  the  remainder  of
the  term  of  the  lease  in  accordance  with  the terms of the lease;
provided, however, that should the superintendent  later  repudiate  the
lease  before the end of the lease term, any amounts that may be due the
lessor due to such repudiation shall  be  calculated  according  to  the
provisions  of  paragraph  (a)  of  subdivision  three  of this section.
Notwithstanding any other provision contained in  this  subdivision,  in
liquidating  a  branch  or  agency of a foreign banking corporation, the
superintendent shall not assume or  repudiate  any  qualified  financial
contract  that  the  branch or agency entered into which is subject to a
multi-branch netting agreement or arrangement that provides for  netting
present or future payment obligations or payment entitlements (including
termination   or   close-out  values  relating  to  the  obligations  or
entitlements) among  the  parties  to  the  contract  and  agreement  or
arrangement  and  the  superintendent shall not be required to assume or
repudiate any other qualified financial  contract  that  the  branch  or
agency entered into; provided, however, that upon any repudiation of any
qualified  financial  contract  or the termination or liquidation of any
qualified financial contract in accordance with its terms, the liability
of the superintendent under such qualified financial contract  shall  be
determined in accordance with subdivision two of this section.
2.  (a)  Except  as  otherwise  provided  in  this  section,  upon the
repudiation or termination of any contract pursuant to  subdivision  one
of this section, the liability of the superintendent shall be limited to
the  actual  direct compensatory damages of the parties to the contract,
determined as of the date the  superintendent  took  possession  of  the
banking  organization.  The  superintendent  shall not be liable for any
future wages other than severance payments (to the extent such  payments
are reasonable), or for payments for future services, costs of cover, or

any  consequential,  punitive  or  exemplary  damages,  damages for lost
profits or lost opportunity or damages for pain and suffering.
(b) Except as otherwise provided in this section, the liability of the
superintendent upon the repudiation of any qualified financial contract,
or  in  connection  with the termination or liquidation of any qualified
financial contract in  accordance  with  the  terms  thereof,  shall  be
limited  as  provided  in paragraph (a) of this subdivision, except that
compensatory damages shall be deemed to include  normal  and  reasonable
costs  of  cover  or other reasonable measures of damages utilized among
participants in the market  for  qualified  financial  contract  claims,
calculated  as of the date of repudiation or the date of the termination
of such qualified financial contract in accordance with its terms.  Upon
the  repudiation  of  any  qualified financial contract or in connection
with the termination or liquidation of any qualified financial  contract
in  accordance  with  the  terms thereof, if the superintendent shall be
entitled to damages, such damages shall be paid over by the party to the
superintendent upon  written  demand  pursuant  to  subdivision  two  of
section  six  hundred  fifteen  of  this  article,  notwithstanding  any
provision in any such contract that purports to effect a  forfeiture  of
such damages.
(c)  In the case of the liquidation of a branch or agency of a foreign
banking corporation by the superintendent,  with  respect  to  qualified
financial  contracts  subject to netting agreements or arrangements that
provide for netting present or future  payment  obligations  or  payment
entitlements  (including termination or close-out values relating to the
obligations or entitlements) among the  parties  to  the  contracts  and
agreements  or  arrangements, the liability of the superintendent to any
party to any such qualified financial contract upon  repudiation  or  in
connection  with  the  termination  or  liquidation  of  such  qualified
financial contract in  accordance  with  the  terms  thereof,  shall  be
calculated  as of the date of repudiation or the date of the termination
of such qualified financial contract in accordance with  its  terms  and
shall  be limited to the lesser of (i) the global net payment obligation
and (ii) the branch/agency net payment obligation. The liability of  the
superintendent  under  this  paragraph  shall  be  reduced by any amount
otherwise paid to or received by the party in respect of the global  net
payment  obligation  pursuant to such qualified financial contract which
if added to the liability of the  superintendent  under  this  paragraph
would  exceed  the  global  net payment obligation. The liability of the
superintendent under this paragraph to a party to a qualified  financial
contract also shall be reduced by the fair market value or the amount of
any  proceeds of collateral that secures and has been applied to satisfy
the obligations of the foreign  banking  corporation  pursuant  to  such
qualified  financial  contract  to  the party. In the event that netting
under the applicable netting  agreement  or  arrangement  results  in  a
branch/agency  net payment entitlement, notwithstanding any provision in
any  such  contract  that  purports  to  effect  a  forfeiture  of  such
entitlement,  the  superintendent may make written demand upon the party
to such contract under subdivision two of section six hundred fifteen of
this article for an amount not to exceed the lesser of  (x)  the  global
net   payment   entitlement   and  (y)  the  branch/agency  net  payment
entitlement. The liability of the party under this  paragraph  shall  be
reduced   by   any   amount   otherwise  paid  to  or  received  by  the
superintendent or any  other  liquidator  or  receiver  of  the  foreign
banking  corporation  in  respect  of the global net payment entitlement
pursuant to such qualified financial contract  which  if  added  to  the
liability  of the party under this paragraph would exceed the global net
payment entitlement. The liability of the party under this paragraph  to

the  superintendent  pursuant  to such qualified financial contract also
shall be reduced by the fair market value or the amount of any  proceeds
of  collateral  that  secures  and  has  been  applied  to  satisfy  the
obligations  of  the party pursuant to such qualified financial contract
to the foreign banking corporation.
(d) A party to a qualified financial contract with a  foreign  banking
corporation,  the  branch  or  agency  of  which  the  superintendent is
liquidating,  which  party  has  a  perfected   security   interest   in
collateral,  or  other  valid  lien  or  security interest in collateral
enforceable against third parties pursuant  to  a  security  arrangement
related  to  such  qualified  financial  contract,  may  retain all such
collateral and upon repudiation of that qualified financial contract, or
in connection with the termination  or  liquidation  of  that  qualified
financial  contract  in  accordance  with  its terms thereof, apply such
collateral in satisfaction of any  claims  secured  by  the  collateral,
provided  that  the  total  amount so applied to such claims shall in no
event exceed the global net payment obligation, if any.
(e) The  following  terms  shall  have  the  following  meanings:  (i)
"qualified  financial contract" means any securities contract, commodity
contract,  forward  contract  (including  spot   and   forward   foreign
exchange),   repurchase  agreement,  swap  agreement,  and  any  similar
agreement, any option to enter into any such  agreement,  including  any
combination  of  the  foregoing,  and  any  master  agreement  for  such
agreements  (such  master  agreement,  together  with  all   supplements
thereto, shall be treated as one qualified financial contract), provided
that  such  contract,  option or agreement, or combination of contracts,
options or agreements is reflected in the books, accounts or records  of
the  banking  organization  or  a party provides documentary evidence of
such agreement; the superintendent may define by  regulation  securities
contract, commodity contract, forward contract, repurchase agreement and
swap  agreement,  and  may  by  regulation  or order determine any other
agreement to be a qualified financial  contract  for  purposes  of  this
paragraph;  (ii)  "global  net  payment obligation" means the amount, if
any, owed by a foreign banking corporation as a whole to a  party  after
giving  effect  to  the  netting  provisions  of  a  qualified financial
contract with respect to all transactions subject to netting under  such
qualified  financial  contract;  (iii)  "global net payment entitlement"
means the amount, if any, owed by a party (or that would be owed if  the
relevant   agreements  provided  for  payments  to  either  party,  upon
termination thereof under  any  and  all  circumstances)  to  a  foreign
banking  corporation  as  a  whole  after  giving  effect to the netting
provisions of  a  qualified  financial  contract  with  respect  to  all
transactions subject to netting under such qualified financial contract;
(iv)  "branch/agency  net  payment  obligation"  means with respect to a
qualified financial contact the amount, if any,  that  would  have  been
owed  by  the  foreign banking corporation to a party after netting only
those transactions entered into by the branch or agency and  such  party
under  such  qualified  financial  contract;  and (v) "branch/agency net
payment  entitlement"  means  with  respect  to  a  qualified  financial
contract the amount, if any, that would have been owed by a party to the
foreign  banking  corporation  after  netting  only  those  transactions
entered into by the branch or agency and such party under such qualified
financial contract. The superintendent shall have authority to prescribe
such regulations relating to qualified financial contracts  and  netting
thereof as the superintendent shall deem appropriate.
3.  (a)  If  the  superintendent  repudiates  a  lease  of the banking
organization for the rental of real or personal property under which the
banking organization was a lessee, the lessor under such lease shall  be

entitled  to  file  a claim with the superintendent for whichever is the
least amount  of:  (i)  the  amount  designated  as  liquidated  damages
contained  in  the  agreement  between  the banking organization and the
lessor,  (ii)  an amount equal to one year's rent under the terms of the
repudiated lease, or (iii) an amount equal to the rent for the remaining
term of the lease.
(b)  If  the  superintendent  repudiates  a  lease  of   the   banking
organization  for  the  rental  of real property under which the banking
organization was a lessor, and the lessee was not in default at the time
of repudiation, the lessee under such repudiated lease  may  either  (i)
treat  the  lease  as  terminated  by  such  repudiation  and vacate the
premises, or (ii) remain in possession of the leasehold interest for the
balance of the term of the lease, and for any renewal  or  extension  of
such   term   that  is  enforceable  by  such  lessee  under  applicable
non-insolvency law, unless the lessee defaults under the  terms  of  the
lease  after  the  date  of  such  repudiation. If the lessee remains in
possession of the leasehold interest, the lessee shall continue  to  pay
to  the superintendent the contractual rent pursuant to the terms of the
lease after the date of the repudiation of such lease,  and  may  offset
against  such  rent  payment  any  damages  which  may accrue due to the
nonperformance of any obligation of the banking organization  under  the
lease  after  the  date  of repudiation. The superintendent shall not be
liable to the lessee for any damages arising after such date as a result
of the repudiation other than the amount of  any  offset  allowed  under
this   subdivision.   Nothing   stated   herein   shall   prohibit   the
superintendent from entering into a new contract with the lessee for the
rental of the leasehold which was the subject of the repudiated lease.
4. Except as otherwise provided, notwithstanding any provision  in  an
unexpired  lease  or other contract, or in applicable law, a contract or
unexpired lease of the banking organization may  not  be  terminated  or
modified  by  any  party  other  than  the  superintendent  without  the
concurrence of the superintendent, and any  right  or  obligation  under
such  contract  or  lease may not be terminated or modified, at any time
after the superintendent's taking of possession, solely  pursuant  to  a
provision  in  such  contract  or  lease  that  is  conditioned  on  the
superintendent's taking of  possession,  or  the  insolvency,  financial
condition or liquidation of the banking organization.
5.  Nothing  in  this  section  shall affect the right of a party to a
contract of a foreign banking corporation to seek  performance  of  such
contract  or  damages  thereon  in  any  other  jurisdiction,  provided,
however, that the superintendent shall not be liable for the performance
of such contract or damages thereon in any other jurisdiction.
6. The rights granted herein are  in  addition  to  any  other  rights
available to the superintendent under common law or any other law.