Oddo Asset Mgt. v. Barclays Bank PLC, et al., No. 126 (NY 2012), involves the application of state common law principles to an international transaction gone bad.   Two investment vehicles, SIV-Lites and Oddo Asset Management, were French asset management companies with over 350 institutional clients and investment of 16.6 billion Euros.  They purchased messanine notes from Barclay’s, who arranged the creation of the mezzanine debt vehicles and prepared the information memoranda underpinning the investment.  Barclay’s also selected the collateral managers. 

When the debt went bad, Oddo sued Barclay’s for breach of fiduciary duty and for aiding and abetting the breach of fiduciary duties by others.  The Court of Appeals held that Barclay’s did not have a fiduciary duty to Oddo. 

In deciding that there was no fiduciary duty, the Court of Appeals explained that a

“fiduciary relationship arises between two persons when one of them is under a duty to act for or give advice for the benefit of another upon matters within the scope of the relation” [quotation omitted] A fiduciary relationship is “necessarily fact-specific” and is also “grounded in a higher level of trust than normally present in the marketplace between those involved in arm’s length business transactions” … While a contractual relationship is not required for a fiduciary relationship, ‘[i]f [the parties] do not create their own relationship of higher trust, courts should not ordinarily transport them to the higher realm of relationship and fashion the stricter duty for them”‘ (citation omitted)

“Foremost”, the Court went on, “there is generally “no fiduciary obligation in a contractual arm’s length relationship between a debtor and a note-holding creditor”.  That in essence determined the outcome of the case as it related to the breach of duty claim.  The interference with contract claim was doomed, said the Court, by reason of the absence of any breach of contract. 

There is no discussion of choice of law in the case — the Court of Appeals applies New York law throughout without discussion of the nationality of the plaintiffs, where the relevant events occurred, whether the law of the plaintiffs’ domicile was the same or different.

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