New York Law Review

Barclays Bank PLC v. BDC Finance L.L.C., 23 N.Y.3d 356 (2014): Interpreting Contractual Dispute Resolution Clauses and Establishing Material Issues of Fact

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23 N.Y.3d 356 (2014)

When interpreting a contract, courts must give fair and reasonable meaning to the language used, and summary judgment is inappropriate when material issues of fact exist regarding compliance with the terms of the agreement.

Summary

In this case, Barclays Bank and BDC Finance were parties to several financial agreements involving collateral calls. BDC issued a collateral call to Barclays, which Barclays disputed. The agreements contained a dispute resolution mechanism. When a dispute arose, the party disputing the call was required to notify the other party and transfer any undisputed amount. BDC argued that Barclays failed to comply with this mechanism, leading to a default. The Court of Appeals found that material issues of fact existed regarding whether Barclays complied with the dispute resolution process and whether it was therefore in default. It reversed the Appellate Division’s grant of summary judgment for BDC, remitting the case for further proceedings.

Facts

Barclays Bank and BDC Finance entered into a series of agreements, including total return swaps, governed by a master agreement, schedule and credit support annex (CSA). These agreements allowed either party to demand collateral based on changes in the value of underlying debt instruments. A dispute arose on October 6, 2008, when BDC made a collateral call on Barclays. Barclays disputed the call. Under the CSA, Barclays was required to notify BDC of the dispute and transfer any undisputed amount. BDC argued Barclays failed to comply with these terms, leading to a default. Barclays partially transferred a disputed amount and claimed it was in compliance.

Procedural History

BDC filed suit in New York Supreme Court for breach of contract and declaratory judgment. Both parties moved for summary judgment. The Supreme Court denied BDC’s motion but granted part of Barclays’ motion. The Appellate Division modified the lower court’s decision by granting BDC’s motion and denying Barclays’ cross-motion. Barclays appealed to the Court of Appeals, which reversed and remanded the case.

Issue(s)

1. Whether Barclays was required to transfer the full Return Amount on the next business day after BDC’s request, as per the

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