Assured Guaranty Municipal Corp., v. RBS Securities Inc., et al

Filing 43

MEMORANDUM OPINION AND ORDER re: 34 MOTION for Reconsideration re; 30 Order on Motion to Dismiss, filed by Assured Guaranty Municipal Corp. The Court has considered all of the arguments raised by the parties. To the extent not specifical ly addressed, the arguments are either moot or without merit. For the foregoing reasons, the plaintiff's motion for reconsideration is denied. The Clerk is directed to close Docket No. 34. SO ORDERED. (Signed by Judge John G. Koeltl on 5/8/2014) (ajs)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
────────────────────────────────────
Assured Guaranty Municipal Corp.,
Plaintiff,

13 Civ. 2019 (JGK)

- v.-

MEMORANDUM OPINION AND
ORDER

RBS Securities Inc., et al.,
Defendants.
────────────────────────────────────
JOHN G. KOELTL, District Judge:

The plaintiff, a monoline insurer, brought this action
asserting fraud, aiding and abetting fraud, and violation of the
New York Insurance Law § 3105 (“Section 3105”) against the
defendants in connection with the plaintiff’s issuance of an
insurance policy in March 2007 (the “Policy”).

On March 18,

2014, the Court granted in part and denied in part the
defendants’ motion to dismiss the plaintiff’s Amended Complaint,
dismissing the plaintiff’s claim under Section 3105 but
sustaining the other claims.

The plaintiff now moves under

Local Rule 6.3 for reconsideration of the part of the ruling
dismissing the plaintiff’s Section 3105 claim.

I.
“The decision to grant or deny a motion for reconsideration
rests within the sound discretion of the district court.”
Vincent v. Money Store, No. 03 Civ. 2876, 2011 WL 5977812, at *1

(S.D.N.Y. Nov. 29, 2011) (citation and internal quotation marks
omitted).

The moving party is required to demonstrate that the

Court overlooked the controlling decisions or factual matters
that were put before the Court in the underlying motion.

See

Walsh v. McGee, 918 F. Supp. 107, 110 (S.D.N.Y. 1996); In re
Houbigant, 914 F. Supp. 997, 1001 (S.D.N.Y. 1996).

This rule is

“narrowly construed and strictly applied so as to avoid
repetitive arguments on issues that have been considered fully
by the Court.”

Walsh, 918 F. Supp. at 110; see also Ackerman v.

Ackerman, 920 F. Supp. 2d 473, 474 (S.D.N.Y. 2013).

II.
The plaintiff has failed to show that there were any issues
of fact or controlling law that the Court overlooked.

While the

plaintiff disagrees with the Court’s decision, that is not a
basis for reconsideration.

See, e.g., R.F.M.A.S., Inc. v. Mimi

So, 640 F. Supp. 2d 506, 512 (S.D.N.Y. 2009).
Moreover, nothing in this motion shows that the Court’s
decision was incorrect.

The Court previously held that,

although Section 3105 may be read to permit recovery of
rescissory damages, such damages are not available in this case
because the plaintiff cannot and does not seek rescission.
Additionally, the rescissory damages are not available because
the plaintiff has not demonstrated that rescission is
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impracticable.

The plaintiff now renews the argument that the

Section 3105 claim should not be dismissed because what the
plaintiff seeks in its claim for payments under the Policy is in
fact compensatory damages, not rescissory damages.
This argument is without merit and has previously been
rejected by the Court.

“Rescissory damages are designed to be

the economic equivalent of rescission in a circumstance in which
rescission is warranted, but not practicable.”

Syncora

Guarantee Inc. v. Countrywide Home Loans, Inc., 935 N.Y.S.2d
858, 869-70 (Sup. Ct. 2012) (quoting Gotham Partners, L.P. v.
Hallwood Realty Partners, L.P., 855 A.2d 1059, 1072 (Del. Ch.
2003)).

In other words, rescissory damages “restore a plaintiff

to the position occupied before the defendant’s wrongful acts.”
Schultz v. Ginsburg, 965 A.2d 661, 669 (Del. 2009) (quoting
Black’s Law Dictionary 419 (8th ed. 2004)).
In this case, for the alleged violation of Section 3105,
the Amended Complaint seeks “damages in the amount of all
payments [the plaintiff] has made and will make pursuant to the
Policy.”

(Am. Compl. ¶ 120.)

Awarding such damages in this

case (less any premiums, if applicable) would effectively
restore the insurer to the position it would have occupied had
it not issued the Policy.

Therefore, such damages are in fact

the economic equivalent of rescission and are thus clearly
rescissory damages.

See MBIA Ins. Corp. v. Countrywide Home
3

Loans, Inc. (MBIA I), 936 N.Y.S.2d 513, 523 (Sup. Ct. 2012)
(describing the plaintiff’s claim for damages “in the amount
that it has been required to pay pursuant to the Insurance
Policies, less premiums [the plaintiff] received” as a claim for
“rescissory damages”), modified on other grounds, 963 N.Y.S.2d
21 (App. Div. 2013).

The plaintiff’s claim closely parallels

the language of the rescissory damages claim in MBIA I.
N.Y.S.2d at 523.

See 936

Moreover, the plaintiff’s claim in this case

includes damages for payments that the plaintiff “will make” in
the future, and such language makes it even clearer that the
damages sought are indeed forward-looking rescissory damages.
The plaintiff cannot escape the language of its pleadings by
labeling the rescissory damages it seeks as “compensatory
damages.”
The Court’s dismissal of the plaintiff’s claim for
rescissory damages is supported by the New York State Supreme
Court Appellate Division’s decision in MBIA Ins. Corp. v.
Countrywide Home Loans, Inc. (MBIA II), 963 N.Y.S.2d 21 (App.
Div. 2013), upon which the plaintiff relied in its opposition to
the motion to dismiss and again in this motion for
reconsideration.

In MBIA II, the Appellate Division modified

the lower court’s decision in MBIA I, and denied recovery of
rescissory damages for an alleged violation of Section 3105
because such damages are available only in cases in which
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rescission is warranted but impracticable.
N.Y.S.2d at 22.

MBIA II, 963

The plaintiff in that case, like the plaintiff

here, did not satisfy those conditions and was therefore denied
recovery for rescissory damages.

Id. at 22.

The plaintiff

here, like the plaintiff in MBIA, contracted away any right to
rescission, does not seek rescission, and has not shown that
rescission was impracticable.
legally unavailable.

Thus, rescissory damages are

See Id.

In its motion for reconsideration, the plaintiff argues
that the decision of the trial court after the remand in MBIA II
indicated that compensatory damages--measured in the same way as
rescissory damages--are available for a violation of Section
3105.

However, that decision, MBIA Ins. Corp. v. Countrywide

Home Loans, Inc. (MBIA III), 39 Misc. 3d 1220(A), 2013 WL
1845588 (N.Y. Sup. Ct. Apr. 29, 2013) (unreported disposition),
does not support the plaintiff’s position in any way.

In MBIA

III, the trial court held that:
While rescissory damages are unavailing for
the
reasons
explained
by
the
First
Department [in MBIA II], nothing in the
contract language cited above bars other
forms
of
monetary
damages,
such
as
compensatory relief.
. . . .
Thus, the First Department’s
recent ruling supports the conclusion that
MBIA’s
potential
recovery
is
not
contractually limited to the repurchase
remedy and may include monetary relief, such
as compensatory damages.
5

MBIA III, 2013 WL 1845588 at *9.

However, in reaching that

conclusion, the court addressed only whether a “sole remedy”
provision in a contract barred the plaintiff’s claims for
breaches of representations and warranties.

Id. at *7-9.

No

such claims are asserted in this case; nor are similar issues
raised before this Court.

The trial court opinion did not deal

with any measure of damages under Section 3105 and did not
conclude that rescissory damages were available by having them
masquerade as compensatory damages.

Therefore, the decision in

MBIA III is irrelevant here and does not show that the Court’s
reading of MBIA II was erroneous.
Thus, because the plaintiff seeks rescissory damages in
this case for its Section 3105 claim, and because such a claim
does not satisfy the conditions outlined in MBIA II, namely,
that rescission is warranted but impracticable, 963 N.Y.S.2d at
21-23, the plaintiff’s claim under Section 3105 was correctly
dismissed.

Accordingly, the motion for reconsideration is

denied.

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CONCLUSION
The Court has considered all of the arguments raised by the
parties.

To the extent not specifically addressed, the

arguments are either moot or without merit.

For the foregoing

reasons, the plaintiff’s motion for reconsideration is denied.
The Clerk is directed to close Docket No. 34.
SO ORDERED.
Dated:

New York, New York
May 8, 2014

____________/s/ ____________
John G. Koeltl
United States District Judge

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