Fox Rothschild Wins Rule 12 Dismissal for U.S. Bank

January 25, 2017 – Press Releases

A team of Fox Rothschild LLP litigators secured a significant victory for a banking client in a complex dispute involving more than $130 million in funding for a chemical manufacturing facility.

Christine N. Lindblad and Peter D. Stiteler of Fox’s Minneapolis office won dismissal of all claims against their client, U.S. Bank, which was named as a third-party defendant in a lawsuit brought by Cargill and Cargill Financial Services International against HF Chlor-Alkali LLC (HFCA).

The case stemmed from a relationship that Cargill and HFCA formed to build a manufacturing facility in Iowa, financed partially through $80 million in bonds and $52 million in financing from CFSI.

U.S. Bank issued a letter of credit to secure the bonds that obligated HFCA to reimburse U.S. Bank for payments made under the letter of credit. U.S. Bank also entered a put agreement with Cargill obligating Cargill to purchase the rights and obligations of U.S. Bank under the reimbursement agreement should HFCA default on its obligations.

Ultimately, HFCA defaulted on its obligations, leading U.S. Bank to notice a default under the reimbursement agreement and, after paying off the bonds, assign its rights to Cargill. Cargill then filed suit against HFCA alleging breach of the reimbursement agreement, among other claims.

In response to the suit, HFCA brought counterclaims against Cargill alleging tortious interference with the reimbursement agreement between U.S. Bank and HFCA. The counterclaim was premised on the theory that HFCA was effectively prevented from making payments to U.S. Bank due to Cargill’s failure to make payments to HFCA that it purportedly owed under various other contracts.

HFCA also claimed that U.S. Bank had aided and abetted and conspired with Cargill to interfere with its contract and had breached the duty of good faith and fair dealing.

The Fox team immediately moved for dismissal of all claims against U.S. Bank, arguing that none of HFCA’s theories of liability were valid.

In a 16-page order, the U.S. District Court for the District of Minnesota dismissed all of HFCA’s claims, holding that the tortious interference claim failed because it was solely based on Cargill’s purported breach of contract, and thus the aiding and abetting and conspiracy claims must also fail. The court also concluded that U.S. Bank had not breached the duty of good faith and fair dealing, holding the language of the contract vindicated U.S. Bank.

Notably in regards to the good faith and fair dealing claim, the court concluded the claim must be dismissed because U.S. Bank had merely exercised its contractual rights after HFCA had already defaulted, reasoning a “party does not act in bad faith when it exercises its legal and contractual rights.” Although HFCA argued that U.S. Bank had previously provided HFCA time to cure any past potential defaults, the court concluded that “U.S. Bank did not act in bad faith by declaring default even though it had previously chosen not to do so. The agreement specifically states that a delay in exercising rights does not waive those rights.”

The court granted both Cargill’s and U.S. Bank’s motions to dismiss and dismissed the counterclaim and third-party complaint with prejudice.

For nearly 20 years, Lindblad, a partner at Fox, has adeptly represented banks, leasing companies and financial institutions in complex commercial litigation. She has extensive experience with insurance recovery lawsuits, receiver and foreclosure actions, fraudulent transfer litigation and vendor leasing disputes. A veteran trial attorney, she is particularly skilled at cross examination and has tried 15 cases to verdict. In addition, Lindblad regularly employs her effective communication skills and aggressive litigation techniques to prepare early, critical case evaluations to efficiently resolve disputes.

Stiteler, an associate with Fox, advises clients in a wide range of complex business and commercial disputes. He has successfully handled civil litigation cases in state and federal court involving professional negligence claims, construction disputes, employment litigation, product liability and insurance coverage. A former clerk for the Minnesota Court of Appeals, Stiteler has also worked on appeals to the Minnesota Court of Appeals and the U.S. Court of Appeals for the Eighth Circuit.