CS Leveraged Loan Funding 2021 LLC et al. v. Bank of America, N.A.
Attorneys and Parties
Brief Summary
Secondary market trading of syndicated loans; enforceability of oral trade terms documented via Bloomberg Chat; effect of disqualified institution (DQ) lists under credit agreements; obligations under Loan Syndications and Trading Association (LSTA) standard terms [industry standard terms governing secondary loan trading, including settlement timing and alternate structure obligations].
The Supreme Court (New York County) granted summary judgment to Bank of America, N.A. on counterclaims for breach of contract against Black Diamond Capital Management (BDCM) and CS Leveraged Loan Funding 2021 LLC (CSLL) and for promissory estoppel against BDCM, and entered judgment for $11,342,583.88; it denied BDCM's motion to dismiss counterclaims against it.
The Appellate Division reversed, vacated the judgment, dismissed the breach of contract and promissory estoppel counterclaims against BDCM, and remanded for further proceedings on the breach of contract counterclaim against CSLL.
Material factual disputes exist about the terms of the oral agreement and what was agreed regarding BDCM’s presence on the DQ list; the credit agreement’s DQ provision turns on whether an affiliate is reasonably recognizable from its name (not knowledge of affiliation), raising a triable issue as to CSLL; disputes also remain about whether Bank of America could and should have settled via a mutually agreeable alternative structure and whether settlement occurred as soon as practicable under LSTA terms; additionally, substituting CSLL for BDCM extinguished any prior BDCM trade, and promissory estoppel is barred where a potentially valid contract governs.
Background
In September 2021, Black Diamond Capital Management (BDCM) approached Bank of America, N.A. (BofA) about buying loans of Crown Paper on the secondary market for funds managed by BDCM. After two calls, the basic terms were noted in a September 29, 2021 Bloomberg Chat. The trade was allocated to CS Leveraged Loan Funding 2021 LLC (CSLL) as buyer; an October 2021 trade confirmation listed CSLL as buyer and BofA as seller. It later emerged that BDCM was on Crown’s disqualified institution (DQ) list, prompting a dispute over whether CSLL was disqualified due to affiliation. BofA asserted it could not settle with CSLL, did not countersign the confirmation until September 2022, and, shortly after, sold the loans with other debtholders to a third party at approximately 35% of par as the loans’ value had fallen.
Lower Court Decision
The Supreme Court (Justice Andrew Borrok) granted BofA summary judgment on counterclaims for breach of contract against BDCM and CSLL and for promissory estoppel against BDCM, awarding BofA $11,342,583.88, and denied BDCM’s motion for summary judgment dismissing the counterclaims against it.
Appellate Division Reversal
Reversed on the law with costs; judgment vacated. The breach of contract and promissory estoppel counterclaims against BDCM were dismissed because the trade was later modified by consent to substitute CSLL, extinguishing any prior BDCM trade, and promissory estoppel is unavailable where a potentially valid contract governs. The court found triable issues as to the terms of the oral agreement, whether CSLL was disqualified under the credit agreement’s name-recognition standard, whether BofA provided a mutually agreeable alternative structure affording economic equivalence, and whether settlement occurred as soon as practicable under LSTA standard terms [industry standard terms governing secondary loan trading, including settlement timing and alternate structure obligations]. The matter was remanded for further proceedings on the breach of contract counterclaim against CSLL. The appeal from the order was dismissed as subsumed in the judgment appeal.
Legal Significance
The decision underscores that disqualification under a credit agreement’s DQ list can hinge on name-based recognizability of affiliation, not mere knowledge; that Bloomberg Chat trade terms can form part of a binding agreement yet still require fact-finding; that LSTA standards concerning timely settlement and economically equivalent alternative structures can preclude summary judgment; and that substituting a new buyer can extinguish prior obligations, foreclosing promissory estoppel when a contract potentially governs.
In syndicated loan trades, parties cannot rely on informal knowledge of affiliations to invoke DQ restrictions where the agreement turns on name recognizability; factual disputes about oral terms, DQ applicability, and LSTA obligations generally defeat summary judgment, and substituting a buyer can eliminate the original buyer’s contractual and estoppel exposure.