Bank of America Wins Dismissal of Breach of Contract

April 8, 2015

Cleary Gottlieb won dismissal of an action in New York County Supreme Court asserting breach of contract and contractual indemnity claims against Bank of America and certain of its affiliates, and a tortious interference claim against a former employee. The plaintiff, an institutional investor, had sold to Bank of America two claims arising from the Lehman Brothers bankruptcy, retaining a third claim as well as certain rights to settle the three claims and share proceeds with Bank of America. Plaintiff attempted to use this authority to force Bank of America to assign and abandon its rights in these claims, and when Bank of America refused, plaintiff brought suit for breach.

In a ruling issued on April 8, Justice Melvin L. Schweitzer, held that the terms of the contract provide no basis for plaintiff’s breach of contract claims. In particular, the Court concluded that “no provision of the Agreement empowers [plaintiff] to compel [Bank of America] to assign [its] rights in the Claims,” and thus Bank of America’s “refusal to consent to the assignment” of the claims “could not have amounted to breach of the Agreement.”

The Court also dismissed plaintiff’s claim against a former Bank of America employee for tortiously inducing breach, concluding both that because plaintiff had failed to state a claim for breach of contract, the derivative claim against the employee must also fail and that separately, the complaint failed to allege sufficient motive to hold an employee liable for tortious interference with his employer’s contract. The Court likewise denied plaintiff’s claim for contractual indemnification, finding that the terms of the parties’ agreement did not alter the well-established rule that parties to a contract are responsible for their own legal fees in the event of litigation.