BPP Illinois, LLC v. The Royal Bank of Scotland Group PLC

Case Type:
Business
Case Status:
Affirmed
Citation:
15-3706-cv (2nd Circuit, Jun 13,2017) Published
Tag(s):
Ruling:
AFFIRMING the judgment of the district court dismissing claims asserted by former debtors (collectively, “BPP”) against the Royal Bank of Scotland Group, PLC (“RBS”), RBS Citizens, N.A. (“RBS Citizens”) and the Citizens Bank of Pennsylvania (“Citizens Bank”) and denying BPP’s investor and guarantors’ request for leave to amend the complaint against the same defendants, the Court of Appeals for the Second Circuit held that the lawsuit was properly barred on the grounds of judicial estoppel and that the request for leave to amend was properly denied as untimely.
Procedural context:
Appeal from an order of the United States District Court for the Southern District of New York (Furman, J.) dismissing the Plaintiffs’ claims. The Court affirmed the judgment of the district court.
Facts:
BPP, a group of hotel-related businesses, borrowed $66 million from Citizens Bank in 2008 in order to finance BPP’s purchase of hotel properties. The transaction involved a loan/swap arrangement that applied LIBOR rates. In 2010, BPP filed for bankruptcy relief in the Eastern District of Texas. On October 4, 2011, BPP’s plan of reorganization was confirmed. On November 15, 2012, the case was closed. At no point during the case did BPP disclose or list in the schedule of assets any claims, and more specifically, any claim relating to alleged LIBOR manipulation, against RBS, RBS Citizens or Citizens Bank (collectively, the “Defendants”). After the bankruptcy case closed, BPP and their investor (the “Equity Plaintiff”) and guarantors (the “FCC Plaintiffs”) (collectively, the “Plaintiffs”) asserted LIBOR-fraud claims against the Defendants in the Southern District of New York. The district court initially dismissed BPP’s claims as time-barred under the applicable statute of limitations and dismissed the claims of the FCC Plaintiffs and the Equity Plaintiff for failing to plead fraud with sufficient particularity. On appeal, the Court vacated the judgment as to BPP and affirmed as to the FCC Plaintiffs and the Equity Plaintiff. On remand, the district court concluded that BPP lacked standing to assert the claims against the Defendants, or in the alternative, were judicially estopped from bringing the claims because BPP failed to list the claims in its schedule of assets in the bankruptcy case. The district court also denied the FCC Plaintiffs and the Equity Plaintiff’s request for leave to amend the complaint because it was untimely. The Plaintiffs appealed. On appeal, the Court found that the three elements of judicial estoppel were met. One, the Court found that BPP took inconsistent positions. There was sufficient information available to BPP prior to plan confirmation--such as RBS’ public filings disclosing investigations by regulators into RBS’ possible involvement in LIBOR manipulation, news reports, and lawsuits against RBS commenced by other parties for LIBOR manipulation--for BPP to disclose the potential claims in the schedules. The Court, applying Fifth Circuit law, found that BPP’s failure to list the claims in its schedule of assets constituted a representation by BPP that no such claim existed. Therefore, BPP’s assertion of the claims against RBS after the bankruptcy case closed was inconsistent with BPP’s prior position. Two, the Court found that the bankruptcy court “adopted” BPP’s position that it had no claim against RBS when it confirmed BPP’s plan of reorganization. Three, the Court found that BPP’s assertion of claims after the bankruptcy case closed would be an unfair advantage because BPP’s former creditors had a right to consider those claims during the bankruptcy case. Thus, the Court found that BPP’s fraud claims were barred by the doctrine of judicial estoppel. Based on the application of judicial estoppel as a bar, the Court did not consider the issue of standing. As to the FCC Plaintiffs and the Equity Plaintiff, the Court found that they failed to show good cause for amending the complaint under Rule 16. Accordingly, the Court affirmed the judgment of the district court.
Judge(s):
Jacobs, Pooler, Circuit Judges, and Crawford, District Judge (sitting by designation)

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