Court Opinion

ID: 4578922
Source: CourtListenerOpinion
Date Created: 2020-10-21 15:00:28.151044+00
Date Added: 2024-06-11T13:41:46.344949
License: Public Domain

19-3121
U.S. Bank National Association v. Triaxx Asset Management LLC

                          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 TO 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
21st day of October, two thousand twenty.

Present:
            DEBRA ANN LIVINGSTON,
                  Chief Judge,
            DENNY CHIN,
                  Circuit Judge,
            KATHERINE POLK FAILLA,
                  District Judge.*
_____________________________________

U.S. BANK NATIONAL ASSOCIATION, solely in its
capacity as Trustee,

                        Interpleader Plaintiff-Appellee,

                v.                                                       19-3121

TRIAXX ASSET MANAGEMENT LLC, FKA ICP ASSET
MANAGEMENT       LLC,     SERENGETI  ASSET
MANAGEMENT, LP, TRIAXX PRIME CDO 2006-2
LTD., TRIAXX PRIME CDO 2007-1, LTD.,

                        Interpleader Defendants-Cross
                        Defendants-Appellants,
                v.

*
   Judge Katherine Polk Failla, of the United States District Court for the Southern District of New York,
sitting by designation.

                                                     1
PACIFIC INVESTMENT MANAGEMENT COMPANY,
LLC,

                       Interpleader Defendant-Cross
                       Defendant-Appellee.

CERBERUS CAPITAL MANAGEMENT, L.P.,

                       Interpleader Defendant-Cross
                       Claimant.

_____________________________________

For Interpleader Plaintiff-Appellee:       ALEXANDER S. LORENZO (Elizabeth A. Buckel on the
                                           brief), Alston & Bird LLP, New York, NY

For Interpleader Defendant-Cross           MICHAEL A. HANIN, Kasowitz Benson Torres LLP,
Defendant-Appellant Serengeti Asset        New York, NY; Henry B. Brownstein, Kasowitz
Management, LP:                            Benson Torres LLP, Washington, DC

For Interpleader Defendants-Cross          ERIC N. WHITNEY, Arnold & Porter Kaye Scholer LLP,
Defendants-Appellants Triaxx               New York, NY
Asset Management LLC, FKA ICP
Asset Management LLC, Triaxx
Prime CDO 2006-2 Ltd., and Triaxx
Prime CDO 2007-1, Ltd.:

For Interpleader Defendant-Cross           SANDEEP SAVLA (Greg Mortenson on the brief), Latham
Defendant-Appellee:                        & Watkins LLP, New York, NY

       Appeal from a judgment of the United States District Court for the Southern District of

New York (Nathan, J.).

       UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND

DECREED that the judgment of the district court is AFFIRMED.

       Triaxx Asset Management LLC (“Triaxx”), Serengeti Asset Management, LP, and their

co-appellants (together, “Appellants”) appeal from a September 17, 2019 judgment of the United

States District Court for the Southern District of New York (Nathan, J.) entered after a bench trial.

                                                 2
On appeal, Appellants do not challenge the substance of the district court’s judgment, but instead

assert that the district court erred by concluding it had subject matter jurisdiction over the case.

We assume the parties’ familiarity with the underlying facts, the procedural history of the case,

and the issues on appeal.

                                          *       *       *

       We review the district court’s factual findings regarding subject matter jurisdiction for

clear error and its legal conclusion as to whether subject matter jurisdiction exists de novo. Oscar

Gruss & Son, Inc. v. Hollander, 337 F.3d 186, 193 (2d Cir. 2003). Below, the district court

concluded that subject matter jurisdiction existed under the Edge Act, 12 U.S.C. § 632, which

gives federal courts jurisdiction over certain actions involving nationally chartered corporations.

For Edge Act jurisdiction to exist, three things must be true: first, the suit must be a civil action;

second, a “corporation organized under the laws of the United States” must be a party; and third,

the suit must “aris[e] out of transactions involving international or foreign banking, or banking in

a dependency or insular possession of the United States, or out of other international or foreign

financial operations.” Id.; see Am. Int’l Grp., Inc. v. Bank of Am. Corp., 712 F.3d 775, 780 (2d Cir.

2013). In American International Group, we further clarified that the federally chartered

corporation must actually engage in the relevant offshore transaction for Edge Act jurisdiction to

exist. Am. Int’l Grp., Inc., 712 F.3d at 784. Because this action is indisputably civil, Appellants

focus their arguments on the second two requirements for Edge Act jurisdiction, arguing neither

is met. For the reasons that follow, we agree with the district court that the Edge Act provides

subject matter jurisdiction.

       First, Appellants challenge the district court’s conclusion that U.S. Bank—which is the

only federally chartered corporation involved—is actually a party. They note that their amended

                                                  3
crossclaim (which is at issue here) did not name U.S. Bank as a party. Further, they argue that this

omission is appropriate because U.S. Bank faces no risk of liability in this dispute because its role

is limited to taking ministerial actions at the behest of Triaxx. And therefore, because there is no

risk of liability, they argue U.S. Bank is not a party for the purposes of the Edge Act. See

Corporacion Venezolana de Fomento v. Vintero Sales Corp., 629 F.2d 786, 792 (2d Cir. 1980)

(concluding that Edge Act jurisdiction existed where the federally chartered corporation faced

potential liability).

        We agree with the district court, however, that the Corporacion Venezolana standard is

met in this case. While U.S. Bank is indeed not named as a party in the amended crossclaim, the

pleading asks for the court’s judgment to be binding on the Trustee all the same. Moreover, Triaxx

initiated proceedings in the Cayman Islands against U.S. Bank asking for essentially the same

declaratory relief as in its crossclaim in the district court and, accordingly, that action was stayed

pending the outcome of these proceedings. Our conclusion is further buttressed by our reading of

the relevant Indentures, which we understand to make U.S. Bank potentially responsible, in part,

to the Noteholders and more than a mere passive instrumentality of Triaxx. Indeed, during oral

argument, counsel for PIMCO directed the Court’s attention to sections of the Indentures to this

effect. Taken together, these facts lead us to conclude that U.S. Bank, which commenced the

original interpleader, faced a risk of liability in this case and, as such, is a party for the purposes

of the Edge Act.

        Second, Appellants argue that this case does not have the required foreign elements for

Edge Act jurisdiction. In essence, they urge us to look closely at the specific consequences that

flow from the district court’s decision and to conclude that because there are no foreign elements,

Edge Act jurisdiction is inappropriate. But this Circuit’s cases do not require such a tight

                                                  4
connection. For example, in Wilson v. Dantas we held that the Edge Act created jurisdiction over

breach of fiduciary duty and contract claims arising out of work done by an individual as part of

an international investment program. 746 F.3d 530, 534–35 (2d Cir. 2014). The relevant question

is whether the claim arises out of foreign transactions, not whether foreign transactions will result

from relief being granted or withheld.

        Here the relevant claims do indeed “aris[e] out of . . . international or foreign financial

operations” by U.S. Bank. 12 U.S.C. § 632. In its role as Trustee, U.S. Bank entered into a set of

complex financial relationships that, in addition to other obligations, have resulted in it holding a

lien over securities held by the Cayman Islands-based Issuers. This is thus a foreign financial

transaction. Moreover, Appellants’ crossclaim arises out of this same web of financial

relationships. Indeed, for the sale ordered by the district court to take place, U.S. Bank must release

the lien. That is sufficient.

        In sum, based on these facts we conclude that U.S. Bank is indeed a party and furthermore

that this suit arises out of its foreign financial activities. And therefore, because this is a civil case,

the Edge Act gave the district court subject matter jurisdiction to decide its merits.

                                            *       *        *

        We have considered Appellants’ remaining arguments and find them to be without merit.

Accordingly, we AFFIRM the judgment of the district court.

                                                         FOR THE COURT:
                                                         Catherine O’Hagan Wolfe, Clerk

                                                    5