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UNIQA v. PLC BNP SA AG AG HSBC PLC ICAP PIC UBS AG BNP LLC AG HSBC USA ICAP LLC (2021)

United States Court of Appeals, Second Circuit.2021-02-10No. 20-1086

Summary

Holding. The appellate court affirmed the district court's order approving the settlement distribution and rejecting Fortinbras's claims, finding no clear error in the district court's factual determination that Fortinbras failed to demonstrate its purported trades actually occurred.

Fortinbras Asset Management appealed a district court order that approved a settlement distribution plan in litigation concerning manipulation of ISDAfix, a benchmark interest rate used in derivatives pricing. Fortinbras challenged the Claims Administrator's rejection of its claims, which involved approximately $3.3 trillion in purported interest rate swap trades conducted under a strategy called the Three-Factor Model. After a year-long audit, the Claims Administrator excluded these claims because Fortinbras failed to provide satisfactory evidence that the trades actually occurred, a conclusion the district court upheld.

On appeal, Fortinbras argued the court should review the district court's decision de novo as a matter of contract interpretation, but the appellate court disagreed. The court determined that the district court's core finding—whether the trades actually took place—was a factual matter subject to abuse-of-discretion review. The appellate court found no clear error because Fortinbras produced only documents showing it created a hypothetical index with Credit Suisse, not proof of actual purchases, and Credit Suisse's records contained no evidence of such transactions with Fortinbras.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

  • Standard of review for factual findings in settlement distribution disputes
  • Sufficiency of evidence to prove alleged interest rate swap transactions occurred
  • Whether documentary evidence of a hypothetical portfolio strategy satisfies proof of actual trades

Procedural posture

Fortinbras appealed from a district court order approving a settlement distribution plan and denying its objection to the Claims Administrator's exclusion of its claims.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion

SUMMARY ORDER

Fortinbras Asset Management GmbH (“Fortinbras”) appeals from an order of the United States District Court for the Southern District of New York approving the distribution of settlement funds and overruling Fortinbrass objection. This settlement comes at the end of a lengthy litigation that began in September 2014 when the plaintiffs in this action accused defendants of manipulating U.S. dollar ISDAfix, a global benchmark reference rate used primarily for pricing interest rates derivatives. At this stage in the litigation all parties have agreed on the distribution plan approved by the district court and, of the 31,119 claims submitted, only one claimant challenges the decision of the Claims Administrator—Fortinbras. We assume the parties’ familiarity with the underlying facts, the procedural history of the case, and the issues on appeal.

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The gravamen of Fortinbrass objection is that Fortinbras engaged in a high number of trades involving interest rate swaps with defendant Credit Suisse as part of what Fortinbras calls the Three-Factor Model (“TFM”) strategy. In Fortinbrass telling, because the TFM strategy involved holding interest rate swaps at precise tenors (essentially, durations), it required buying and selling swaps daily to ensure the precise balance was maintained. The total value of these purported trades is more than $3.3 trillion. After a year-long audit the Claims Administrator concluded that these claims should be excluded because Fortinbras had not satisfactorily shown these trades actually occurred. After reviewing the evidence, the district court agreed.

Fortinbras erroneously argues that we should review the district courts determination de novo as it purportedly involved an interpretation of the settlement agreement and the plan of distribution. In fact, the district courts decision did not rest on an interpretation of the settlement or the plan of distribution. Had Fortinbras satisfied the district court that it had in fact engaged in TFM-related interest-rate swaps with Credit Suisse, its claims would presumably have been approved. What Fortinbras instead challenges is the district courts conclusion that the purported trades did not occur. This is thus a challenge to the distribution of settlement funds, which this Court reviews for abuse of discretion. In re Holocaust Victim Assets Litig., 424 F.3d 132, 146 (2d Cir. 2005). And, with regard to factual findings, a district court only abuses its discretion when its conclusions are clearly erroneous. Id. (quoting Zervos v. Verizon N.Y., Inc., 252 F.3d 163, 169 (2d Cir. 2001)).

We discern no clear error here. Fortinbras has submitted documents that show that it collaborated with Credit Suisse to create an index that tracked the value of a hypothetical portfolio of interest rate swaps. But for essentially the reasons stated by the district court, we agree that the documents submitted by Fortinbras fail to demonstrate that it actually purchased the products that would make this hypothetical portfolio real. Further, Fortinbrass purported counterparty in these transactions, Credit Suisse, could not identify any such transactions with Fortinbras in its records. Fortinbras has had ample opportunity to demonstrate to the Claims Administrator and the district court that these trades took place. Fortinbras has not done so; nor has it met the high bar for showing the district courts factual findings were clearly erroneous. As a result, there is no abuse of discretion.

We have considered Fortinbrass remaining arguments and find them to be without merit. Accordingly, we AFFIRM the order of the district court.